The US dollar weakened vs. most major currencies as positive news increased risk appetite among investors. Retail sales in the US rose 0.6% in June, beating forecasts of a 0.4% rise. June sales were helped by higher gasoline prices and more incentives at car dealerships. Business inventories fell 1% as companies continue to bring supplies of unsold good into line with slowing demand. US producer prices rose by 1.8% in June, much higher than forecasts of a 0.9% rise.
Investors continue to look towards US corporate earnings after today’s release from Goldman Sachs Group Inc. which posted record earnings.
The euro was slightly lower against the dollar as German investor confidence unexpectedly fell in July, suggesting that recovery in the Euro Zone may take longer to materialize. The ZEW Center for European Economic Research said that investor confidence declined to 39.5 from 44.8, while investors forecasted a gain to 47.8. The European Union’s statistics office said that industrial production rose 0.5% in May, which is its first rise in nine months but was less than forecasts of a 1.5% rise.
The British pound strengthened against the dollar as retail sales increased in June. Retail sales were up by 1.4% from a year earlier. Other data showed the UK inflation rate dropped in June below the Bank of England’s 2% target rate as consumer prices rose 1.8% from a year earlier. The retail price index measure of inflation fell 1.6%. Housing prices continued to plummet as it dropped 12.5% in May from a year ago.
The Japanese yen fell against higher-yielding currencies as a better-than-expected earnings report from Goldman Sachs Group helped increase risk appetite. News of Goldman Sachs’ earnings raised hopes that the worst may be over for the financial industry, which has suffered up to almost $1.5 trillion in writedowns and losses since the start of 2007. Positive data in US retail sales also helped investors increase their yen-carry trade positions.
The Canadian dollar rose against the dollar as crude oil rose above $61 a barrel. A rise in crude oil prices helped the loonie as it is Canada’s biggest export. Statistics Canada also released a report showing that new motor vehicles sales increased 1.0% month-over-month in May.
The Australian and New Zealand dollar both strengthened against the dollar after statements from the Reserve Bank of New Zealand. Central bank Governor Alan Bollard said that New Zealand’s economy will recover ahead of most of its trading partners. The kiwi rose as traders bet that the central bank will increase interest rates from 2.5% over the next 12 months. Australian business sentiment turned positive in June for the first time since December 2007. The sentiment index, which surveys more than 400 companies, showed optimists outnumbered pessimists as it rose 6 points to 4.
