After reaching a weekly high of 1.3102 on a Financial Times report that central banks had increased their euro holdings at the expense of the US dollar, the euro weakened against the greenback early in the New York session, before rebounding and ending the day on a minor gain. The afternoon rise mainly resulted from German and French authorities' comments that the G7 should take action to stem the dollar's depreciation. Though German November Construction Orders fell by 6.0 percent, the euro-area's total Industrial New Orders unexpectedly rose 1.7 percent on an impressive 21.7 percent increase in France. Italian retail sales in November also beat the consensus figure, coming in at 0.2 percent versus -0.2 percent expected. There were no notable economic releases on the other side of the Atlantic, though the Conference Board's Consumer Confidence Index is now expected to drop slightly in January. Traders are bracing for a slew of economic data next week, including the Fed's expected quarter-point increase in the benchmark rate.
The euro was quoted at 1.3062 against the dollar, 0.6943 versus the pound and 133.99 against the Japanese yen at 21:00 GMT. Following pessimistic earnings reports by Infineon Technologies and Royal Philips Electronics, continental stocks fell close to monthly lows on worries that technological corporate profits may taper. Rising raw material costs for steelmakers also contributed to the overall decline, while higher crude oil prices resulted in losses for airlines such as Deutsche Lufthansa AG, though companies such as BP benefited. In other equity news, France Telecom shares fell 0.5 percent after it offered a buy-out bid for Equant minority shareholders, suggesting the business communications subsidiary was in for some restructuring. Overall sentiment was marked by a growing fear that corporate profit growth will wane this year.
France's CAC-40 fell 0.1 percent, the 30-share DAX dropped 0.6 percent, and the FTSE Eurofirst 300 edged down by 0.2 percent.
The European 10-year bond rose on fears that high oil prices will stem growth in the euro-area, as crude oil prices continued to remain high. These worries were exacerbated by the Bundesbank's report of weak fourth quarter growth in Germany. As the ECB's stance on interest rates has appeared less hawkish of late, traders are increasingly emphasizing the importance of a slowdown in growth (resulting from high oil prices), rather than the potential acceleration in inflation.