Sterling took centre stage in European trading hours Tuesday falling initially on data showing that U.K. consumer prices rose at double the Bank of England's target rate in January, before recovering quickly as market participants digested the latest comments from Bank of England Governor Mervyn King.
The pound had traded at USD1.6106 against the dollar prior to the CPI data release, before slumping to USD1.6019.
The euro climbed steadily higher in early European trading but its strength was capped at around USD1.35 against the dollar on mixed data, with slightly disappointing fourth-quarter gross domestic numbers offsetting stronger German confidence. Rumors of a weak German ZEW reading proved unfounded with current conditions coming in at 85.2 compared with the 82.8 recorded in January. Economic expectations also rose slightly to 15.7 points from 15.4 points in January, but this was below the consensus forecast of 20.0 points. But euro-zone growth was slightly weaker than expected in the final quarter of 2010 with GDP only growing by 0.3% compared to the 0.4% quarterly growth expected by economists.
The dollar weakened slightly Tuesday against the euro and yen after U.S. retail sales data came in weaker than expected.
Tuesday morning, the euro was at USD1.3515 from USD1.3489 late Monday. The dollar was at JPY83.73 from JPY83.34.
The Canadian dollar pared its modest gains against the U.S. dollar Tuesday morning, after disappointing U.S. retail sales data dimmed hopes for a smooth-sailing U.S. recovery. The U.S. consumer is considered essential to achieving a full economic recovery in the U.S., Canada's major trading partner. The U.S. dollar was at CAD0.9866 Tuesday morning, from CAD0.9888 late Monday. It slipped to a session low of CAD0.9847 overnight, then continued to wander in a slim, half-cent range. Read more