The Euro slumped versus the greenback as a shift in investor sentiment bolstered demand for the latter. Recent U.S. employment metrics cast doubts on whether the Federal Reserve may trim stimulus further. The Euro was weighed by deflation concerns.
Euro Dips On Inflation Concerns
While the U.S. Dollar performed well, the Euro was weighed down by worries over the possibility that a slowdown in inflation could have a negative impact on the region’s economic growth outlook. A bounty of macroeconomic reports is due out this week, though trading volume may remain subdued as the markets were closed on Monday due to the Martin Luther King Holiday. The greenback advanced the most since November against the shared currency as investors are anticipating that the central bank may cut back on the monthly bond purchases. The Dollar Spot Index reached the highest level since September after the gauge which measures economic surprises showed the biggest rally in two years. The Euro fell versus the British Pound subsequent to the release of a report which confirmed an astounding hike in retail sales; and it slumped versus the Yen on Monday during Tokyo market hours.
BOE Under Pressure
With the announcement of stellar retail sales out of the U.K. the Bank of England is under immense pressure to raise the benchmark interest rate sooner than planned. The numbers denoted the biggest increase in ten years, as consumers spent more money in small stores as well as department stores than economists had previously predicted. According to some online Forex analysts, with market traders going long on the Sterling, the currency may rise too quickly.
Aussie Extends Decline
Elsewhere in the Forex, the Australian Dollar plunged to a three-year low against its U.S. counterpart in early Monday trading after a private number of individuals who form part of a think tank indicated that inflation has risen in the South Pacific nation. The TD-Melbourne Institute’s index which assesses inflation, posted a 0.7 percent surge for December, while it increased +0.2 percent in November. The release indicated further that on a year over year basis the prices for main staples such as vegetables and fruits rose 2.7 percent. Meanwhile, China indicated that real estate prices sustained a major advance once again in the month of December. Out of 70 cities surveyed, 23 denoted a double-digit hike. Prices for homes in the Chinese capital went up 0.5 percent. The Aussie remained under pressure after Chinese economic reports showed that the world’s second largest economy slowed down in the final quarter of 2013.