The U.S. dollar inched lower against some rivals on Friday as sluggish retail sales and consumer sentiment data added to the uncertainty surrounding a potential step back in monetary stimulus next week.
The greenback was on track for its first weekly loss in five, according to FactSet, with the biggest currency gains coming from the British pound and New Zealand dollar.
U.S. retail sales in August climbed 0.2%, the smallest gain since April. Economists had expected an increase of 0.5%. Wholesale prices rose a seasonally adjusted 0.3% in August, compared with expectations of a 0.2% increase.
Separately, consumer sentiment fell more than expected to a preliminary reading of 76.8 in September from 82.1 in August.
Fed policy makers are due to hand down their latest policy decision on Wednesday, and many analysts expect they will cut their $85-billion-a-month rate of bond purchases, with estimates ranging from $5 billion to $15 billion.
The White House on Friday dismissed a Japanese press report that said President Obama was ready to name Larry Summers to the top Federal Reserve position.
The greenback has appreciated 4% this year. The euro appreciated 4.8% and the yen slumped 11%.
EURO
The euro fluctuated against the U.S. currency after weakening on a report that showed industrial output in the 17-nation region contracted in July.
Data released showed year-over-year Eurozone Industrial Production w.d.a. declined by 2.1% in July, down from the 0.4% decrease registered the previous month. Analysts expected much less fall of 0.1%. On a monthly basis Industrial Production s.a. fell 1.5% in July, following a 0.6% increase in June and against forecasts of growing 0.1%.
According to data released, German annual inflation rose 1.5% in August, following 1.9% growth registered the previous month. This result is in line with analysts' forecasts. On a monthly basis German CPI remained unchanged, as expected.
After 26 months of negative readings, Eurozone Sentix Investor Confidence jumped to 6.5 in August, from -4.9 in July, Sentix GmbH informed on Monday. Analysts expected the indicator to post -2.8.
On Friday’s EU Finance Ministers meeting the officials discussed the status of the bailout program for Cyprus, as well as the funding gap of around EUR4.0 billion for Greece. ESM Regling said Cyprus will get new bailout tranche of EUR1.5B. UMF will decide same question on September, 16.
ECB Asmussen said Euro area data bring some comfort, point to "very gradual" recovery in 2H 2013. Aso he noted EU economic data "nothing to organize a great party right now".
POUND
The sterling was on track for a weekly gain of 1.6% against the dollar, boosted by better-than-expected employment data. The report, which included a surprise drop in the unemployment rate, sparked speculation that Britain’s central bank would need to raise interest rates sooner than it had previously said.
In the U.K., unemployment claims fell by 21,000 in August, following a 29,200 decline the previous month, according to a poll of economists before today’s report. The unemployment rate fell to at 7.7%, the lowest since November.
Governor of the Bank of England Mark Carney noted that current pace of UK economy recovery is far from its potential. He called to be vigilant on housing market and said that market has had more positive outlook on jobless market than hisself. Also he noted he doesn’t afraide to raise interest rates.
YEN
The yen strengthened against the dollar after Japan’s machinery orders stagnated in July and amid concern a sales-tax increase will hamper growth. Japanese machinery orders were unchanged in July from the previous month when they fell 2.7%, the Cabinet Office said. Economists predicted an increase of 2.4%.
The yen rose Monday as data released early Monday showed that the Japanese economy grew much faster in the second quarter than initially estimated. April-to-June gross domestic product grew a revised 3.8% on an annualized basis, compared with last month’s preliminary reading of 2.6%.
Also in Japan, investors were reacting to the last weekend news that Tokyo will host the 2020 Olympics, a decision that benefited the broader market, with the Nikkei Stock Average up 2.2%.
The Japanese yen was quite volatile Friday before the upcoming three-day weekend.
On Friday Japan’s finance minister Aso said the government will consider stimulus package without issuing new government bonds to fund it. He also noted tax breaks to encourage investment are more effective in stimulating economy.
Moreover, Japan’s Cabinet Office raised its September economy assessment:
-says economy headed toward gradual recovery;
-upgrades capital expenditure, says signs of recovery seen in service sector;
-downgraded its assessment of consumer spending and exports;
-says end of deflation is approaching.
The yen weakened earlier as minutes of the BOJ’s Aug. 7-8 meeting showed policy board members said the central bank’s bond purchases were putting downward pressure on yields and consumer price expectations have turned favorable.
COMMODITY CURRENCIES
AUSSIE: Australia’s dollar, which is down 8.2% this year, strengthened after data showed exports rose more than expected in China, its biggest trading partner. Overseas shipments rose 7.2% in August from a year earlier. That compares with the 5.5% median estimate of economists and July’s 5.1% gain. China’s consumer prices rose 2.6% last month from a year earlier, matching the median economist estimate.
China's Industrial Production (YoY) for the month of August came at 10.4% vs 9.9% exp and 9.7% in July, with Retail Sales (YoY) (Aug) showing a 13.4% vs 13.2% exp and 13.2% prior.
KIWI: The kiwi was on track for a weekly gain of 1.8% against the greenback, as its central bank said interest-rate hikes would likely come next year.
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