· Dollar Weakens On Fading Confidence
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· Yen Slides On Disappointing Data
EURUSD
In what was still a rather quiet trading session, the euro managed to recover some of its recent losses against the US dollar. French economic data came in softer than expected, with producer prices rising by only 0.3% m/m (compared to expectations of 0.4%) and business confidence slipping to a 15-month low during the month of February. The sharp dip in French confidence is actually pretty concerning since France is the primary engine of growth that is keeping the Eurozone afloat. The latest string of economic data reduces the overall likelihood of an interest rate hike by the European Central Bank to curb inflation at the risk of growth. With an increasing differential between US and Eurozone interest rates as well as growth rates, we can easily understand why the dollar has gained strength against the euro. We remain convinced that the differential itself is key. Once this differential begins to reverse in the Eurozone's favor, we could very well be graced with the next trend reversal in the dollar. Meanwhile also weighing on the Greenback today was a weaker US consumer confidence number. Optimism in the US fell for the second consecutive month as the new record in gasoline prices and interest rate hikes take a direct hit at the pocketbooks of US consumers.