The Euro drops ahead of the retail sales report today

The euro fell against the dollar before a report that may show retail sales slid for a seventh month, supporting the case for the European Central Bank to cut interest rates. The British pound weakened versus the greenback on concern an industry report will show U.K. services shrank, the yen gained for a fifth day versus the dollar on speculation widening credit-market losses will erode corporate earnings, prompting investors to sell higher-yielding assets financed in Japan. “While the ECB is widely expected to stand put on interest rates this week, speculation about further rate cuts will persist,” said Osamu Takashima, chief analyst for global market sales and trading in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s largest publicly listed lender. That “will pose a strenuous downside risk on the single currency.” The EUR/USD is currently trading at $1.2975 as of 8:40am, GMT.

Sterling fell against the dollar and euro on Tuesday after the previous day's heavy losses with investor concerns over UK economic and financial sector health still hampering sentiment. British share prices were struggling to snap a three-day losing streak with battered investors still bracing for bad news on corporate earnings, leaving risk aversion firmly intact. Wariness was also heightened ahead of a Bank of England interest rate decision on Thursday, which is expected to see the cost of borrowing cut 50 basis points to 1.0 percent. The GBP/USD is currently trading at $1.2958 as of 9:00am, GMT.

The yen may climb to 80 per dollar by mid-year unless Japan intervenes to support its export-dependent economy, according to Royal Bank of Scotland Group Plc. The U.S. government, which is raising record amounts through bond sales to spend its way out of a recession, may welcome Japanese intervention as long as the dollars it buys are used to purchase U.S. Treasuries, Masafumi Yamamoto, head of foreign-exchange strategy at Royal Bank of Scotland in Tokyo, wrote in a research note yesterday. “The U.S. needs to issue a huge amount by selling Treasuries but China is unlikely to increase purchases,” said Yamamoto at the biggest U.K. bank, who confirmed the contents of the report. “Japan, which wants to avoid further appreciation in the yen, is now the best candidate to replace China’s role. Mutual interest between U.S. and Japan now match.” The USD/JPY is currently trading at 89.10 as of 9:10am, GMT.

Today's Economic Events