Forex Market Review – Aussie falls on weak retail sales; EURUSD hits new 16-month low

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EURUSD opened the new trading week lower at 1.2693 versus Friday’s close of 1.2713 and fell to a new 16-month low of 1.2665 before settling. Euro was hurt by negative news from the euro zone over the weekend renewing concerns on the European sovereign debt crisis. There were newspaper reports that said the IMF is losing confidence in Greece. Another paper reported that an adviser to German finance minister Wolfgang Schaeuble told a Greek newspaper that a 50% write-down on Greek debt holdings was not enough to put the country’s huge debt on a viable footing.

The focus turns to industrial production data later today from Germany, perceived as Europe’s powerhouse. Forecasts are for numbers to drop 0.5 percent, which would be the first slide since September, and will further damp sentiment.

Euro tumbled against the yen to drop to 97.26, the lowest level in over a decade.

Investors will also focus on the meeting today between German Chancellor Angela Merkel and French President Nicolas Sarkozy on EU fiscal integration.

The dollar remains buoyed amid a risk averse environment, with the ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, up at 81.267 from about 80.936.

Against the Swiss franc, the dollar hit its highest level since February 2011, peaking at 0.9594 in the Asian session.

The Australian dollar weakened after disappointing retail sales data which were flat in November. This adds to the case for a further rate cut next month by the central bank. Retail sales were unchanged at A$20.9 billion despite forecasts for a rise of 0.3 percent. It was the softest outcome in five months and came despite the Reserve Bank of Australia cutting rates in November.  AUDUSD opened in Asia at 1.0199 and fell to 1.0144.

The dollar held steady against the yen after a brief dip to 76.78, it recovered to 77.00, well above a two-month low hit last week.

Japan markets are closed today for a public holiday.