In US trade, the euro experienced a choppy ride before eventually moving higher, as weak US retail sales data added weight behind the market’s push for more quantitative easing.
In recent weeks the US dollar index has pushed up to two-year highs on diminished expectations of further balance sheet expansion from the Fed. QE is something the market desperately wants, and with each piece of below-par economic data, it does everything in its power to remind the Fed of this, including pushing the dollar lower.
Last night’s retail sales data disappointed to the downside, contracting by 0.5% against expectations for 0.1% growth. It was the third consecutive monthly fall in the metric, and another sign of a fragile US consumer. But will this be enough to convince Bernanke and the Fed to get off the fence and implement more stimulus measures, or will the Fed continue with its ‘wait and see’ approach?
The market’s next indication of this will come over the next two days when Bernanke testifies before the house and senate finance committees. Having ended yesterday’s Australian session around the 1.2240 level, the euro fell to a low of 1.2176 before recovering to close US trade at 1.2273. Upon resuming for Asian trade, the euro is essentially unchanged.