Forex Review – Euro rallies to $1.32; sterling rises on strong retail sales

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The euro rallied strongly against the dollar to $1.32 on positive news flow today. Economic data from Germany came in stronger than expected. German PPI numbers were higher, as well as key IFO Business morale numbers, which rose for a sixth straight month. Meanwhile, reports of a possible boost to IMF firepower is also buoying the single currency after comments from IMF Chief Christine Lagarde yesterday. IMF and G20 meeting continue all weekend. EURUSD opened the European session at 1.3145 and hit a high of 1.3208.

 

Sterling made strong gains on improved UK retail sales data.  Helping maintain momentum is the less dovish stance from the Bank of England, after minutes of its April policy meeting were released on Wednesday. UK Retail sales jumped 1.8 percent in March, beating expectations for a mere 0.4 percent increase. This is the biggest rise in more than a year. GBPUSD surged to a five-month high of 1.6120, the highest since 8 November 2011.

 

Yen remains under pressure, down over 1.5 percent against the dollar since Monday.  Yen weakness is driven by speculation that the Bank of Japan will further ease policy and expand asset purchases at their next meeting on 27 April. This is based on comments by BOJ governor who said that growth in Japan was still stagnant. So it is likely that more stimulus measures will be introduced. EURJPY rose to a two-week high of 107.95, tracking a stronger EURUSD. USDJPY hit a high of 81.76.

 

Canadian dollar rose against the US dollar ahead of key Canadian inflation data. USDCAD  fell 0.5 percent to 0.9904. But lower than forecast CPI ended the loonie’s gains. Canada’s annual inflation rate in March fell to 1.9 percent from 2.6 percent in February, which might cause a change in the Bank of Canada’s hawkish outlook released earlier this week after its policy meeting.