The US dollar gained ground against most of its major counterparts after the release of mixed data. Retail sales showed a record decline, while consumer confidence unexpectedly rose. October retail sales fell 2.8 percent, while market expectations were only for a 1.2 percent drop. The University of Michigan Consumer Confidence index rose to 57.9 in November from 57.6 in October, above expectations of 56.0.
Look for deleveraging and risk aversion to continue to dominate market sentiment as traders await the G20 seminar this weekend in Washington.
Analysts will look towards any changes that may impact the international financial structure, which will continue to keep investors sidelined.
The euro weakened against its US and Japanese counterparts, but came close to a near record high against its UK counterpart as data confirmed that the Euro Zone is officially in a recession. France’s figures showed positive growth in the third quarter, but German figures confirmed two consecutive quarters of losses. The euro managed to gain ground against the pound as investors forecast a much deeper UK recession verses that of the euro zone.
The British pound fell to a 13-year low against most of its major counterparts as the market anticipates further UK interest rate cuts. Look for the pound to remain on the defensive as the market focuses on the Bank of England continuing to reduce rates possibly bringing its benchmark rate toward zero by next year.
The Japanese yen weakened initially against the dollar, but managed to recover after the release of mixed data out of the US. In other news Bank of Japan’s Seiji Nakamura spoke yesterday and reiterated that the Bank of Japan won’t rule out further monetary cuts if the economy continues to deteriorate. Look for the yen to continue to benefit from safe haven flows.
The Canadian dollar fell against the greenback as oil prices fell again overnight to $57 a barrel after initially rallying yesterday. In other news, Canada’s September manufacturing sales rose a modest 0.1 percent following a 3.7 percent decline in August. Look for the loonie to continue to track commodity prices.
The Australian dollar managed to hold on to the majority of its gains after a rise in equities helped the currency recover some of its previous losses. Also assisting the Aussie was the Reserve Bank of Australia (RBA) intervening to buy the currency both Wednesday and Thursday of this week. With the global economic outlook still uncertain, look for the Aussie’s gains to remain capped.
The New Zealand dollar gave back most of its gains as regional stock markets ultimately fell from earlier highs. Also weighing on the kiwi was expectations of further rate cuts by the Reserve Bank of New Zealand by as much as 1 percentage point. Look for the kiwi to continue to be pressured as risk aversion is at the forefront of investor’s minds.
The Mexican peso gained over 1 percent after loses seen earlier this week. Look for the gains, however, to be short lived as investors focus on signs of a deepening recession in the United States, Mexico’s largest trading partner.
