The euro remained above the two-month low reached against the dollar on Monday, lifted by a successful Spanish and European Financial Stability Facility bond auction. Spain was able to sell more than the targeted amount and at relatively lower financing costs, while bonds sold by the EFSF raised 2 billion worth of bonds. The Spanish Treasury sold 4.94 billion euros of 12- and 18-month bills, more than the intended 4.25 billion euros. Also some positive data from the German ZEW survey showed that economic outlook in Germany is improving. The euro remains vulnerable though as Moody’s put eight Spanish banks on review today for a possible downgrade. EURUSD opened the European session at 1.3194 and rose to a high of 1.3235 before easing to 1.3174 after US retail sales data.
Retail spending in the U.S. rose at a slower rate in November, with sales rising 0.2% following a sharper 0.5% increase in October, recording the slowest rate of increase in five months due to a weak jobs market. Economists had forecast a 0.5 percent rise. The dollar and Treasury prices pared losses and rose after the report. The focus now turns to the Federal Reserve meeting later in the day, though the Fed is expected to leave interest rates unchanged at 0.25 percent and is not expect to ease policy any further.
Sterling held steady in a range against the dollar, trading between 1.5565 and 1.5623. The pound was supported by domestic data showing a dip in inflation to 4.8% in November. Against the euro, sterling hit a ten-month high early in London trading, as euro reached 84.40 pence due to euro zone debt concerns.
The Swiss franc weakened against the dollar after the Swiss government cut its economic growth and inflation forecasts for next year, but said the recent sharp slowdown may be short-lived as long as the euro-zone sovereign debt crisis does not worsen. USDCHF hovered around ten-month highs, hitting 0.9385 early in the session and lows of 0.9341.
USDJPY traded a range between 77.68-89.