Euro Rallies but Eurozone Growth Could Continue to Slow (page 2 of 2)

According to Bank of Japan Governor Fukui, the signs of a US slowdown are stronger. In the BoJ monthly report, the central bank expects exports to rise at a slowing pace and production in the short term to be flat. Next week, we only have a few pieces of Japanese economic data due for release: leading indicators and the merchandise trade balance. The Bank of Japan will also be releasing the minutes from their January monetary policy meeting. Since they left interest rates unchanged back then as well, the report should have no impact on the Japanese Yen.

British Pound Rally Comes to an End

After moving higher for five days straight, the British pound's rally has finally come to an end. There was no UK economic data released today which means that the move was driven almost entirely by dollar weakness. We continue to expect the British pound to remain firm next week with the minutes from the latest Bank of England monetary policy meeting due for release along with retail sales. The Quarterly Inflation Report released earlier this week was hawkish so we suspect that the vote to cut rates at the last meeting was a close one. As for consumer spending, the tight labor market and rise in BRC retail sales suggests that consumer spending will rebound after falling 0.4 percent last month.

Australian and New Zealand Dollars Extend Gains, Canadian Dollar Breaks Down

The Australian and New Zealand dollars ended the week not far from their year to date highs despite mixed economic data and softer gold prices. New Zealand retail sales weakened in December, providing evidence that the economy is slowing more quickly than its Western neighbor. A lot of economic data has been released from Australia and New Zealand over the past few days so it is surprising that next week's economic calendar is almost completely devoid of Australian or New Zealand data. Instead, the market's focus will be on the Canadian dollar, which sold off aggressively today. We expect volatility in the pair to continue with consumer prices, international securities transactions, leading indicators and retail sales scheduled for this coming week.