U.K. Housing And Retail Data Weigh on Pound, Will The BoE Cut Again?

Daily FX
U.K. Housing And Retail Data Weigh on Pound, Will The BoE Cut Again?
Tuesday April 29, 6:15 am ET
By John Rivera, Currency Analyst strategist@dailyfx.com

Talking Points

• Japanese Yen: Japanese Holiday

• New Zealand Dollar: Deficit Unexpectedly Widened

• Swiss Franc: Consumption Fell On Lower Car Sales

• Euro: Declining Retail Sales Weighs on Euro

• Pound: Housing Market Continues To Deteriorate

• US Dollar: Consumer Confidence and Housing Data on Tap
The U.K. CBI distributive trades report crossed the wires at -26, sending the pound over 50 points lower. The reading was over eight times lower than the -3 that was expected. The pound was weighed lower throughout the overnight session as U.K. mortgagee approvals fell to 64,000-the lowest level in at least nine years. The tight credit markets remain an obstacle for borrowers and will continue to suppress house prices going forward. Central Bank Governor Mervyn King said today that the “ratio of house prices to earnings will fall” when speaking to the U.K treasury select committee. He would go on to say that although retail sales have been “surprisingly strong” consumer spending will fall, possibly quite sharply. The MPC leader would also reiterate the committee focus on keeping inflation near their target, but if consumer consumption continues to falter, another rate cut may be needed to cushion the fall of the economy.

The Euro fell to as low as 1.5539 during the overnight session, despite light trading due to a Japanese holiday, on a four year low in retail sales. The Eurozone retail PMI index fell to a seasonally adjusted 41.8 in April from 48.2 the month prior, as rising food and energy costs saw consumer’s buy 40% less food and drinks. Rising inflation has kept the ECB frozen in its tracks as its mandate is to maintain price stability. The central bank has continued to maintain its hawkish stance, despite mounting evidence that the regions economy is starting to realize the affects of the U.S. slowdown and the credit crisis. As long as the current interest rate differential is expected to hold between Europe and the U.S., the Eur/Usd will find support and prevent any significant reversal from the dollar.

The New Zealand Dollar came under heavy selling pressure when its annual trade deficit widened NZ$50 million in March, against expectations of a surplus of NZ$395. The shortfall was a result of an eight month low in exports, bringing the 12 months ended March 31 total deficit to NZ$4.42 billion. New Zealand exporters saw a decline in demand from China, shipping nearly 40 million less goods. The Kiwi fell as low as 0.7762 before consolidating around 0.7780. Economic growth is expected to slow to its lowest levels in over ten years, as record interest rates have dulled growth faster than officials had hoped.

U.S. consumer confidence and the S&P/ Case Schiller home price index will serve as the appetizer for tomorrow’s Fed Rate decision. The two indicators will give investors insight into the most troubling areas of the economy. Expectations are that the housing industry will continue to deteriorate and in turn drag consumer confidence with it. Until the housing sector establishes a bottom, the downside risks to the U.S. economy will remain, which will continue to weigh on the dollar. However, a rebound in these numbers combined with the expectation that the central bank will signal a pause to their current easing cycle may have Dollar bulls looking to test support at 1.54.

Is The Euro Headed Below 1.500?

Euro falls against US dollar

Euro lower against dollar ahead of Fed meeting, falling French consumer confidence

BERLIN (AP) — The 15-nation euro slid lower against the U.S. dollar on Tuesday as markets waited to see if the U.S. Federal Reserve Bank would continue its campaign to lower interest rates, a marked contrast from the European Central Bank.

In midmorning trading in Europe the euro stood at US$1.5574, down from the US$1.5645 that it purchased late Monday in New York. The British pound was down to US$1.9875 from US$1.9900 in New York, while the dollar slipped to purchase 104.15 Japanese yen from 105.26 on Monday.

The euro blasted to a new all-time high of US$1.6018 last week on continued concern about the U.S. economy but most analysts believe the Fed is poised to deliver another interest rate cut on Wednesday, after the central bank meets for two days to discuss the U.S. economy. Though lower interest rates can spur a nation’s economy, they can weigh on its currency as traders transfer funds to countries where they can earn higher returns.

But the euro has been brought back down as traders have been taking a closer look at economic reports from Germany, Europe’s biggest economy, and neighboring France, too.

“After the big move lower on emerging signs of weakness in the Eurozone economy — capped off by yesterday’s surprise decline in German CPI — it’s now a case of looking for an update from across the Atlantic starting with tomorrow’s (Fed) verdict and in the near term culminating with the non-farm payrolls on Friday,” said James Hughes at CMC Markets.

Adding to the euro’s slide was a report by the French national statistics office Insee. It reported that French consumer confidence dropped to a new record low in April, as consumers became more pessimistic about their future personal financial situation and France’s outlook and unemployment.

Consumer confidence declined to minus 37 in April from minus 36 in March, Insee said, matching the consensus of economists in a Dow Jones Newswires poll. The reading was the lowest since the survey began in 1987.

Dollar Strength To Continue Against Major Currencies

Daily FX

Dollar Strength To Continue Against Major Currencies
Tuesday April 29, 2:22 am ET
By Ilya Spivak, Currency Analyst strategist@dailyfx.com

As we expected, a light US calendar saw technical levels be the guiding principle behind EURUSD price action last week. Our target of 1.60 was hit mid-week, followed soon after by a sharp breakdown past trend line support. As we had speculated here on numerous occasions, the run to 1.60 owed more to momentum than underlying fundamental outlook. Having touched the psychological level being aimed at, Euro bulls gave up.

Fibonacci Forum.EUR/USD

Strategy: Bearish below 1.5800, Targeting 1.5343

As we expected, a light US calendar saw technical levels be the guiding principle behind EURUSD price action last week. Our target of 1.60 was hit mid-week, followed soon after by a sharp breakdown past trend line support. As we had speculated here on numerous occasions, the run to 1.60 owed more to momentum than underlying fundamental outlook. Having touched the psychological level being aimed at, Euro bulls gave up. The decline looks to be supported at 1.5560, the 23.6% Fibonacci retracement of the 02/08–03/17 rally. We see a retracement to just below 1.58 in the near term as current losses are consolidated, followed by a decline to the 38.2% retracement at 1.5343.

For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.GBP/USD

Strategy: Bullish against 1.9787, Targeting 2.0092

Last week we opted to remain flat on GBPUSD as the pair oscillated between the 23.6% and 50% Fibonacci retracements of the 03/14-04/15 decline in search of a direction. Following the most recent test of the downward sloping trend line resistance-turned-support established at the 03/14 high, GBPUSD has pushed higher to close above the 38.2% Fib level at 1.9903. The daily chart suggests symmetry between the most recent test of the 50% Fib and psychological resistance level at 2.00 and the one on 04/04. A continuation of this symmetry would take the current rally to the 61.8% Fib at 2.0092.

For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.USD/JPY

Strategy: Bullish against 103.70, Targeting 105.19

Last wee we advocated being long USDJPY above 102.90, the 38.2% Fibonacci retracement of the 12/27/07-03/17 decline. This proved wise, as the pair rallied to surpass the 104.00 level. We now notice an upward-sloping trend line connecting recent lows that has guided price action since the bottom above 95.00. This trend line would suggest a retracement to 103.70 followed by continued upside. As we have noted for several weeks now, we see USDJPY test the 50% Fibonacci retracement at 105.19.

For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.USD/CHF

Strategy: Bullish against 1.0201, Targeting 1.0547

Last week, USDCHF broke out higher of its range between the 23.6% and 38.2% Fibonacci retracements of the 02/14-03/17 decline. The move was catalyzed by the broad US dollar rally following the Euro’s rejection at 1.60. The rally has neatly topped out at the 50% Fibonacci retracement at 1.0375. This will likely prove to be a retracement point, seeing the pair ease back to find support at 1.0201 before resuming higher towards the 61.8% Fib at 1.0547.

For more resources on the USDCHF, please visit the DailyFX Swiss Franc Currency Room.USD/CAD

Strategy: Bullish against 1.0039, Targeting 1.0250

Last week we saw significant support established at the intersection of the 50% Fibonacci retracement of the 01/22-02/28 decline and an upward sloping trend line established in November of last year. We looked for the pair to rally, and so it has. USDCAD has rallied past the 61.8% Fib at 1.0120 and has stabilized there. Our view here remains unchanged from last week. We see the pair continue to rise for a test of the long-term range top at 1.0250.

For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.AUD/USD

Strategy: Bullish against 0.9287, Targeting 0.9500

Last week opened with AUDUSD breaking past 0.9400. We remain with our bullish bias, looking for the pair to reach 0.9500. Similarly to the EURUSD, this trade saw AUDUSD hit our target and break down soon after as 0.9500 became a double top. The down move was contained at 0.9287, the 61.8% Fibonacci retracement of the 02/28-03/20 decline. We maintain that as long as AUDUSD remains above trend line support, the up-trend is intact. That said, current positioning does not offer particularly favorable risk-reward parameters. The pair is currently stalled below psychological resistance at 0.9400. We will look for a retracement back to Fib support at 0.9287 for a long position targeting a return to test 0.9500.

For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.NZD/USD

Strategy: Bearish against 0.7850, Targeting 0.7700

Our analysis missed the mark on NZDUSD last week. We had been looking at a long-term supporting trend line established in August and reinforced by the 38.2% Fibonacci retracement of the 01/22-02/27 rally at 0.7896. NZDUSD price action negated this assessment as the pair decisively crashed through the trend line and the 50% Fib. This amounts to a trend change, with our bias shifting to bearish and eyeing a decline to the 61.8% Fib at 0.7700.

Japan May Escape Recession on Chinese Export Demand

Japan May Escape Recession on Chinese Export Demand (Update1)

By Jason Clenfield

April 28 (Bloomberg) — Japan has followed the U.S. into every recession in the past three decades. This time may be different.

Since 1970, when the U.S. accounted for 30 percent of Japanese exports, each of its five recessions triggered a decline in Japan’s shipments abroad. Now, that figure is only 20 percent, reflecting the success of companies including Toyota Motor Corp. and Hitachi Construction Machinery Co. to take advantage of the opening of Chinese and Russian markets.

Japanese companies have also streamlined production and reduced debt since the bursting of the late-1980s stock and property-price bubbles that ushered in more than 10 years of stagnation. The result: The world’s second-largest economy is better positioned to withstand a slump in the biggest economy.

“The U.S. is no longer the absolutely dominant market it used to be,” said Julian Jessop, chief international economist at Capital Economics Ltd. in London. “Japan itself is in much better health. It’s transformed itself after the lost decade.”

This month the two most bearish brokers on Japan — Goldman Sachs Group Inc. and Morgan Stanley — backed off from predictions that Japan would slide into a recession this year.

The catalyst was an April 17 revision to figures for February industrial production that showed output rose to a record rather than fell.

Interest-Rate Shift

By the end of that day, bets the Bank of Japan would lower its key overnight rate by year-end had fallen to 4 percent, down from 71 percent on March 20, according to calculations by JPMorgan Chase & Co. Now investors see an 83 percent chance of a rate increase by December.

“I had to retreat from my call,” said Takehiro Sato, chief Japan economist at Morgan Stanley in Tokyo, who since February had been predicting a dual U.S.-Japan recession. He now predicts Japan’s economy will go through a “soft patch.”

Goldman, which since January had been telling clients that Japan was already in a recession, now forecasts the economy will expand at an annual rate of about 2 percent in the first quarter. That would match the average growth over the past five years.

Exports have risen in each of the past seven months, even as shipments to the U.S. fell. Shipments to China grew 45 percent in the past two years. Those to Russia doubled.

Toyota Sales

A 5.6 percent drop in U.S. vehicle sales didn’t stop Toyota’s total unit sales from rising in the first quarter. Last week its president, Katsuaki Watanabe, made his first visit to the Beijing Auto Show. The carmaker forecasts sales in the world’s fastest growing major economy will double by 2010.

Hitachi Construction, the world’s biggest maker of giant excavators, last week reported a 76 percent gain in the three months ended March 31. Building and mining booms in China and the rest of Asia drove sales.

“Japan’s manufacturing sector is actually a showcase for how to implement globalization,” said Jesper Koll, director of Tantallon Research Japan, a hedge fund. “Whether it’s Russia, the Middle East or Latin America, take your pick, Japan’s on top of it.”

Japan isn’t completely protected from faltering American growth. The U.S. housing crisis has activated a “chain reaction” that will hit Japan indirectly, according to Tetsuro Sugiura, chief economist at Mizuho Research Institute Ltd. in Tokyo.

Bernanke Warning

Gross domestic product in the U.S. grew at an annual pace of 0.6 percent in the fourth quarter. The economy could shrink in the first half of this year, and a recession is possible, Federal Reserve Chairman Ben S. Bernanke told legislators on April 2.

“First Europe and China will slow, then exports from Japan to those countries will slow,” said Mizuho’s Sugiura. “The hit will come after a time lag.”

Whatever the external conditions, corporate Japan is in better shape than it’s been at any time since the bubble burst.

The average ratio of corporate liabilities to assets has dropped to about 65 percent, the lowest level since 1955, from about 80 percent in the mid-1990s, according to Takuji Okubo, senior economist at Merrill Lynch & Co. in Tokyo.

Companies have soaked up excess production capacity. An index that measures manufacturing capacity against demand has been at or below zero for nine quarters, indicating there are few idle factories, according to the central bank’s Tankan survey of business sentiment. The index stood at 31 points in March 2002 as the economy emerged from its last recession.

“People tend to blow hot or cold on Japan,” Jessop said. “At the moment, the pendulum has swung too far. If you’re looking at developed economies, Japan is going to be one that surprises on the upside this year.”

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net

Dollar Looking at a Perfect Economic Storm

Daily FX
Dollar Looking at a Perfect Economic Storm.

There was little to alter the greenback’s slow but steady rise through the week’s end Friday. The only economic indicator to cross the wires was the final reading of the University of Michigan’s consumer confidence survey. And, while the revision is rarely a market mover, the downside adjustment to a new 26-year low stands as a poignant reminder of why economists and traders are still wary on the outlook for the US economy and the dollar. Looking ahead to next week, volatility is almost guaranteed with an economic calendar that is crowded with the top market moving indicators. Taking the oncoming tidal wave day-by-day, things begin slow with a report-free Monday. Tuesday will offer the Conference Board’s measure of consumer sentiment for April; though with the University of Michigan’s figure already ingrained into the market, there is likely to be limited reaction to number. The following day’s docket holds the greatest potential for a fundamentally-driven run in the majors. The morning brings the advanced reading of first quarter GDP. Oddly enough, the consensus from economists is calling for a 0.5 percent annualized pace of expansion (a tick below the fourth quarter clip) despite a deepening housing recession, a turn in employment and contractions in both the services and manufacturing sectors. Such a moderate forecast opens the market to considerable surprises; but a reaction could be dampened by a FOMC rate decision due later that afternoon. Fed Fund Futures are pricing in only a 74 percent chance of a 25bp rate cut while the remaining 26 percent is calling for no change. This is a considerable change from where we were only a few weeks ago, but we have also seen evidence that the credit crunch is easing. After the calendar crests on Wednesday, ISM manufacturing will represent a lull for fundamental traders the following session considering the previous day’s event risk and Friday’s NFPs. Payrolls are expected to have fallen by 78,000 jobs this month, what would be a fourth consecutive drop.

Pound Rallies Unexpectedly As Growth Cools To Three Year Low

Theoretically, we would expect the currency of an economy that just reported a drop in growth to fall; however theory clearly didn’t follow with today’s UK GDP release. The advanced reading of first quarter expansion came in line with expectations with its quarterly measure, but fell short of the official consensus with its annualized figure. The 2.5 percent pace of growth through the year was a slight miss of economists’ 2.6 percent forecast, but set a three-year low for economic activity nonetheless. It comes as no surprise that the biggest weight on expansion was the cooling in the financial services component (which makes up 28 percent of the economy) to a five-year low given the ongoing credit crunch that forced the BoE to nationalize Northern Rock and offer ever more aggressive liquidity injections. So why the pound rally? Well, considering the IMF has forecasted the worst pace of growth since 1992, traders likely expected much worse.

Euro Ends The Week At A Three Week Low

Though the European economic calendar has been relatively light this week, the euro has still managed to close at its lowest level in three weeks against the benchmark dollar. What would ultimately be a more than 500-point plunge in EURUSD was further depressed on Friday by mildly dovish comments from ECB members and declines in two second tier inflation indicators. This morning, central banker Lorenzo Bini Smaghi noted that inflation in the region had reached an acceptable level and further that the euro was pressing record highs largely due to the weakness in its US counterpart. Policymaker Christian Noyer offered the same inflation sentiment. From the economic docket, both the German Import Price Index and Euro Zone money supply numbers for March cooled. The German inflation report was still near its 19-month high, but marked a notable slip. The money supply number on the other hand slipped to a 12-month low 10.3 percent pace of annualized growth; and considering ECB President Trichet’s constant mention of “vigorous” M3 growth, this makes an interesting point.

Japanese Yen Crosses Mixed as Inflation Hits Decade High

The Japanese yen ended the day very mixed across the majors, as the low-yielding currency fell against the US dollar and the British pound but rallied versus the euro and high-yielding Aussie and Kiwi dollars. Indeed, Japanese fundamentals have had little bearing on price action in the yen pairs for quite some time, but it is worth noting that Japanese headline inflation jumped to an annual rate of 1.2 percent in March, the highest reading in a decade. Most of the pick up can be attributed to the recent rallies in oil and other commodity inputs, as the index excluding the costs of fresh food and energy brings the metric down to a tepid 0.1 percent pace. Inflation driven by rising costs will discourage spending by firms and consumers alike and leaves the Bank of Japan in a precarious position. While the policy board likely remains in favor of rate normalization, substantial downside risks to exports and faltering consumption will force the Bank to leave rates unchanged and if anything, will lead them to consider cutting rates. Nevertheless, with interest rates already at an ultra-low 0.50 percent, the stimulating potential of a 25bp rate cut would be extremely small and leaves the odds in favor of steady rates for much of this year.

Will the Comm Dollars Falter?

The Australian and New Zealand dollars faltered on Friday as commodities including metals and agricultural goods pulled back, while resilient oil prices helped support the Canadian dollar against the strengthening greenback. There was little in the way of economic data to move the currencies, but traders should watch out for next Monday’s New Zealand trade balance – as the surplus is forecasted to widen – while Friday’s Australian retail sales figures are anticipated to show that consumption contracted during the first quarter.

Forex News: U.K. Growth Slows Most in Three Years

Daily FX
Forex News: U.K. Growth Slows Most in Three Years
Friday April 25, 7:09 am ET
By John Rivera, Currency Analyst strategist@dailyfx.com

Fundamental Headlines

• USDJPY – Japanese headline inflation jumped to an annual rate of 1.2% as of March, the highest reading in a decade. Most of the rise can be attributed to the recent rallies in energy and other commodity inputs. Tellingly, removing the costs of fresh food and energy brings the metric down to just 0.1%. Nevertheless, speculation is increasing that the next policy move from the BoJ may be to raise rates. For more news and resources, visit our Japanese Yen Currency Room.

• GBPUSD – The U.K. economy grew at its slowest pace in three years at 2.5%. The quarterly measurement fell to 0.4% from 0.6% compared to the last three months of 2007. A housing slump and tight credit markets have stifled growth and continue to weigh on the economy. Services, which have remained resilient, only grew 0.6%- the lowest since Q1 2005. Despite the decline the BoE may pause their easing policy to asses the effects of their recent infusion of liquidity. For more news and resources, visit our GBP/USD Forum.

• EURUSD – The German import price index fell more than expected at 0.4% compared to 1.1% the month prior. Prices minus energy remained flat as record oil prices have been driving inflation. The news reduces inflation concerns for the ECB, which has tried to temper recent speculation that the central bank may their benchmark rate in the near term. Discuss the topic and your trade ideas in the EUR/USD Forum.

• U.S. Says New Find Shows Iran Still Sends Arms To Iraq (link) – Wall Street Journal

• Commercial Banks Step To Fed Window (link) – Wall Street Journal

• Frank Pushes For Mortgage Intervention (link) – Financial Times

• U.S. Notes Decline, Headed For Biggest Two Week Loss Since 1982 (link) – Bloomberg

• U.K. Economy Expands At Slowest Pace in Three Years (link) – Bloomberg

Dollar continues rally in the face of bad economic data

Dollar continues rally in the face of bad economic data
Friday April 25, 6:47 am ET

Dollar gains against euro despite laundry list of bad economic news; market watchers stumped BERLIN (AP) — The dollar continued to rally Friday in the face of more bad economic data from the U.S.

The euro fell as low as $1.5602 in morning European trading, down from $1.5686 in New York late Thursday.

The 15-nation euro has slid since it reached the latest in a string of records on Tuesday, breaking through the $1.60 mark for the first time and rising as high as $1.6018.

On Thursday, it lost more than two cents after a downbeat German business confidence survey and an unexpected drop in American claims for jobless benefits.

UniCredit analysts said in a research note that “the U.S. dollar recovery across the board … looks fairly excessive at this stage.” They noted that “nothing has really changed on the current economic scenario.”

The dollar has been weighed down recently by a combination of gloomy U.S. economic data and high European inflation.

That has fueled expectations that the Federal Reserve will cut interest rates yet again while the European Central Bank leaves rates unchanged — or even raises them, a possibility deflated by Thursday’s German business confidence survey.

In other trading Friday, the British pound rose to $1.9865 from $1.9738. The dollar rose to 104.37 Japanese yen from 104.25 yen.

Pound Rallys As Growth Numbers Ease Recession Fears.

Daily FX
Pound Rallys As Growth Numbers Ease Recession Fears
Friday April 25, 6:06 am ET
By John Rivera, Currency Analyst strategist@dailyfx.com

Talking Points

•    Japanese Yen: Inflation Rises to Highest In a Decade

•    Swiss Franc: USD/CHF Above 104, First time in Over a Month

•    Euro: Breaks Below 1.5600 As Rate Hike Possibilities Decline

Talking Points

•    Japanese Yen: Inflation Rises to Highest In a Decade

•    Swiss Franc: USD/CHF Above 104, First time in Over a Month

•    Euro: Breaks Below 1.5600 As Rate Hike Possibilities Decline

The Pound jumped over 150 basis points when Q1 GDP printed inline at 0.4%, despite the annualized rate falling to 2.5% from 2.8% – showing the economy grew at its slowest rate in three years. The Sterling found support after the less than abysmal numbers provided relief for traders, who feared the worst after the decline in March retail sales. The hope that the economy may resume growth in the later part of the year is being fueled by a pickup in manufacturing. However, the service sector which has been resilient slowed to 0.6%, the lowest since Q1 2005. The BoE’s recent £50 billion infusion of liquidity has led to speculation that the MPC may pause in their easing to give it an opportunity to influence the markets. The Pound which has been a little over sold is looking to test resistance at the 1.9850 price level.

The Euro fell below 1.560 against the dollar for the first time since March 03, as easing German import prices reduced European inflation concerns. The German Import price index in March fell to 0.4% from 1.1% the month prior, pulling down the annualized rate to 5.7% from 5.9%.  The pair was trying to recoup some of the losses from yesterday before the data reinforced recent comments from ECB members trying to dampen expectations of a future rate hike. The pair was weighed further when Eurozone M3 money supply slowed to 10.3% from 11.3% the month prior, as loans to the private sector declined, reducing expectations for future growth. The region is starting to show signs of slowing as evidenced by the decline in German business confidence and if inflation concerns start to ease a future ECB Rate cut becomes more likely.

Japanese Inflation rose to highest level in a decade, which has raised the speculation that the BoJ may raise rates by year’s end. New Governor Shirakawa is noted for his belief that the steady increasing of interest rates is the key to fostering long-term growth. Nevertheless, the USDJPY rose above the 104 handle on increasing risk appetite

The University of Michigan Consumer Confidence survey is the only data on tap for the U.S. The measurement is a final reading and is expected to confirm the preliminary results that confidence is waning. However, the story of the day may be if U.S companies can continue their string of surprising earnings and the return risk appetite. The greenback and equities may start to feed off of each other as confidence is returning that the worst is over for the U.S. economy.

Is The Euro Headed Below 1.500?

Euro drops further

Euro drops further
Friday April 25, 5:54 am ET

Euro continues slide, drops below $1.56 BERLIN (AP) — The euro continued to slide against the dollar on Friday, dropping below $1.56 and trading more than 4 U.S. cents short of the all-time high it reached earlier this week.

The euro fell as low as $1.5584 in morning European trading, down from $1.5686 in New York late Thursday.

The 15-nation euro has slid since it reached the latest in a string of records on Tuesday, breaking through the $1.60 mark for the first time and rising as high as $1.6018.

On Thursday, it lost more than two cents after a downbeat German business confidence survey and an unexpected drop in U.S. claims for jobless benefits.

UniCredit analysts said in a research note that “the U.S. dollar recovery across the board … looks fairly excessive at this stage.” They noted that “nothing has really changed on the current economic scenario.”

The dollar has been weighed down recently by a combination of gloomy U.S. economic data and high European inflation.

That has fueled expectations that the Federal Reserve will cut interest rates yet again while the European Central Bank leaves rates unchanged — or even raises them, a possibility deflated by Thursday’s German business confidence survey.

In other trading Friday, the British pound declined to $1.9711 from $1.9738. The dollar rose to 104.57 Japanese yen from 104.25 yen.

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