Growth Takes Backseat to Stronger Inflation Pressures (page 2 of 2)

Unlike German business confidence, which deteriorated in June, French business confidence was stronger than expected. Overall, the Eurozone economy is still performing well enough to warrant another interest rate hike from the European Central Bank. ECB members continue to remain hawkish. Quaden reminded the markets today that the central bank is closely monitoring upside inflation risks.

The FOMC meeting could drive some movement in the EUR/USD as well as tomorrow's German unemployment figures. Stronger employment could pave the way for an upside surprise in German retail sales on Friday. Meanwhile over in Switzerland, KoF leading indicators fell short of expectations in the month of June. This led to broad based weakness in the Swiss Franc.

British Pound Holds Steady as Markets Welcome in New UK Prime Minister

Next to the Japanese Yen, the British pound performed the best against the US dollar today. After a 10 year rule under Tony Blair, UK citizens and global investors are excited to welcome in a new Prime Minister. Gordon Brown, the new man on the job has frequently been credited for navigating the economy through its longest period of growth in the past two centuries.

His tenure as Chancellor of the Exchequer has earned him respect from around the world. This sentiment has allowed the market to shrug off weaker economic data. The CBI retail sales index tumbled from 31 to 17 in the month of June, well below the market's 25 forecast.

Although cold weather has played a primary role in slowing sales, the drop in spending suggests that we could see deterioration in consumer confidence on Friday.

Commodity Currencies Slip After RBNZ Op-Ed Article

The Australian, New Zealand and Canadian dollars have all sold off significantly despite the rebound in commodity prices. Economic data was weaker than expected overnight, but much of the fall was related to fear of further intervention from the Reserve Bank of New Zealand.

The RBNZ issued an opinion article on their website indicating intervention is "an ongoing process." Although intervention to date has been futile, traders are not willing to take the risk.

Meanwhile, New Zealand also reported a weaker than expected trade surplus in the month of May. This should not impact the first quarter current account balance due out tonight because trade data in the first three months of the year was healthy. Australia also reported softer leading indicators for April, which comes in stark contrast to the stronger data that the market has become accustomed to seeing.