[B]Market Review[/B] - 14/01/2014 [I]21:42GMT [/I]
[B]Dollar strengthens against the yen after upbeat U.S. retail sales
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U.S. dollar rose against the Japanese yen on Tuesday after data showed that U.S. retail sales increased more than expected in December, bolstering the outlook for the economy going into 2014.
Versus the Japanese yen, dollar found support at 103.02 at Asian open on Tuesday and climbed higher to 103.52 after data showed that trade deficit in the Japan widened to 1,254.3 billion yen in November, price later dropped to 103.23 at Asian midday but only to rally to as high as 104.29 near New York close due to the release of better-than-expected U.S. retail sales data.
The Commerce Department said U.S. retail sales rose 0.2% last month, beating expectations for a 0.1% increase. Core retail sales, which exclude automobile sales, climbed 0.7% in December, above forecasts for a 0.4% increase.
The single currency traded sideways against the dollar in Asia and then dropped to 1.3649 shortly after European opening, however, ‘euro-supportive’ comments from European Central Bank Governing Council member Ewald Nowotny lifted price sharply higher to 1.3699 in European morning but profit-taking ahead of 1.3700 pressured price lower ahead of New York open. Later, euro briefly fell to 1.3658 after release of upbeat U.S. retail sales and then traded sideways for rest of New York session.
European Central Bank Governing Council member Ewald Nowotny said on Tuesday that ‘there was a potential upside to the ECB’s growth forecast for this year. The ECB revised its growth forecast for 2014 slightly higher in December, saying it now expects growth of 1.1%.’
The British pound moved in a choppy fashion versus the dollar on Tuesday. Cable dropped to 1.6368 in early European trading and then rose sharply to 1.6447 in tandem with euro and active cross buying in sterling in European morning, price then swiftly tanked to 1.6396 after the U.K. inflation data but later rose further to 1.6465 in New York before retreating.
On the data front, U.K. reported that the annual rate of consumer inflation rose 2.0% in December, slowing from 2.1% in November. It was the first time since 2009 that the U.K. inflation rate was in line with the Bank of England’s official target of 2%.
In the other news, Fed’s Plosser says 'prefers to end bond purchases before late 2014; economy ‘on firmer footing than it has been for the past several years; expects 6.2% U.S. unemployment by year end; rise in inflation toward 2%; Dec jobs growth likely hit by cold weather; drop in workforce participation mostly driven by demographics.’
Philadelphia Fed President Charles Plosser said on Tuesday that “the droves of Americans dropping out of the work force may not be a problem that needs to be fixed with policies; the U.S. labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell 0.2 percentage point to 62.8 percent in December, returning to the more than 35-year low hit in October.”
[B]Data to be released on Wednesday: [/B]
Japan machine tools orders, Germany GDP, Swiss retail sales, EU trade balance, US empire state mfg, PPI, Fed releases Beige Book report and Canada existing home sales.