Retail Sales for December Disappoint Dollar Bulls

EUR/USD has been ranging up and down through the whole day as the Forex traders were expecting the release of the important fundamental data today. After the retail sales report for December came out, euro started to gain at a fast pace against the U.S. dollar and broke the important resistance level of 1.4900.

December advance estimate of the retails sales fell down by 0.4% after a 1.2% growth a month earlier, while a stagnation at 0% was expected by the majority of the analysts.

PPI (Producer Price Index) in December, seasonally adjusted, fell down by 0.1%, while a moderate growth of 0.2% was forecasted after the November's 3.2% growth.

New York Empire Manufacturing survey showed that this important manufacturing index fell down in January to 9.0 from 9.8 in December. The mean consensus for this index was at 10.0.

Manufacturers' and trade inventories (seasonally adjusted) in November 2007 went up in accordance with the experts' expectations - by 0.4% after October's low 0.1% growth.

EUR/USD Bearish After Excellent Economic Data

EUR/USD began the day with some slow downtrend, but continued to accelerate its bearish tendencies after news releases from U.S. showed some well above average macroeconomic stats.

Advance retail sales report for November from U.S. Census Bureau showed that this indicator increased by 1.2% compared with October - much better than 0.6%, which was expected by the market analysts.

The Producer Price Index (PPI) in November rose by surprising 3.2%, compared with 0.1% in October and 1.5% expected growth.

Initial jobless claims for the week ending December 8 were also released today - 333k against 340k (revised up from 338k) last week and below the 335k, as the economists were expecting.

Manufacturing and trade business inventories in October increased by 0.1% - less than expected value of 0.3% growth rate.

Low Producer Prices Inflation Helps Dollar

After Bureau of Labor Statistics reported its statistical data for October Producer Price Index (which indirectly affects Consumer Price Index with a time lag) today, U.S. dollar began reclaiming some of its strength against major currencies. Most notably - against Euro which grew significantly against all majors today. After PPI report dollar went back from past 1.4700 levels to 1.4670 levels. PPI increased by 0.1% - lower than pessimistic forecast value of 0.3%, that was after September 1.1% growth. Core PPI didn't change at all.

October Retail Sales came out at the expected level of growth, increasing by 0.2%, while September numbers were revised from 0.6% to 0.7% increase. The same situation was observed with September Business Inventories report - growth by 0.4% and previous month number revised from 0.1% to 0.3% increase.

Good PPI increases the chances for interest rates cut by Fed. But today Richard Fisher (Federal Reserve Bank of Dallas President) spoke about the Fed's vision of U.S. economy growth as strong and inflation risks as a more important factor. Perhaps, lower producer prices inflation caused more demand for U.S. dollar basing on its increased buying ability.

Dollar Strengthens on Average Economic Data

EUR/USD is closing below 1.3900 level after a major rally earlier this week. The main driver for the growth were the market expectations for the FOMC to lower the interest rates by at least 0.25% next week, while last two days' correction can be a reflections of some less confident traders, that are sure that if FOMC won't lower rates or will stay with 0.25% decrease for a longer period, then markets will have to play back current growth. Lack of surprise data helped the second type of traders today.

U.S. export (excluding agricultural) and import (excluding oil) prices changed by 0.1% and -0.1% respectively in August, while July brought -0.2% and 0.1% respectively.

Retail sales were up by 0.3% in August, which is lower than both July growth by 0.5% and the same expected value for August.

Industrial capacity utilization in August remained at the 82.2% level as it has been in July, while the market was expecting decline by 0.2%.

Manufacturers' and trade business inventories rose by 0.5% in July compared to 0.4% growth in June. This is a slightly more optimistic number than 0.3% growth expected by the market.

EUR/USD Hits Monthly Low After ECB Intervention

EUR/USD hit new monthly minimum at 1.3606 today, bouncing back from both the psychological support of 1.3600 and technical support level around 1.3605. One of the main reason for the vigorous dollar behavior can be seen in ECB today's currency intervention of more than €130 billions. Such a harsh step was needed to prevent a highly possible financial market collapse.
Economical statistics which came this day from the Unites States of America strengthened USD even further. Advance retail sales came out at 0.3% growth compared to 0.2% expected and retail sales excluding autos came out at 0.4% compared to 0.3% expected. Manufacturers' and trade inventories, seasonly adjusted, are estimated at 0.4% growth compared to May 2007 (at the expected level).

U.S. Consumer Sentiments at Highs while Dollar at Lows

Today the preliminary consumers sentiment index (by University of Michigan) came out showing surprisingly good results - 92.4 against 86.0 expected - a historically high level of consumers confidence which indicates an uptrend the economy of United States. While consumer sentiment index is at its highest levels, dollar is suffering a continuous EUR/USD rally which showed a new maximum (for more than ten years period) at 1.3813 level today. Perhaps, strong macroeconomic indicators from U.S. prevented EUR/USD from keeping above 1.3800 mark, but it can be broken again at any time soon. Some other U.S. statistics became available today - business inventories growth in May increased from 0.4% to 0.5% (while a growth slowdown to 0.3% was expected). Advance monthly retail sales for June came out unexpectedly bad - falling down by 0.9% (they were expected to remain intact) - which is quite strange considering the high consumers sentiment index.