Euro Headed Below 1.55 (page 2 of 2)

Meanwhile the Swiss economy is headed in a completely different direction. The UBS Consumption Indicator rebounded strongly in June, to the highest level in four months.

British Pound falls as UK consumers cut back

The deterioration in the UK economy is intensifying.

According to the Confederation of British Industry, retail sales dropped to the lowest level in 25 years last month as higher gasoline prices, job losses and falling house prices prompted Britons to cut their discretionary spending.

As a big contributor to GDP, the latest survey of the retail sector points to the potential of a sharp deterioration or negative GDP growth in the coming quarters.

Consumer credit, mortgage approvals and net lending on dwellings have also fallen, reflecting the tough conditions in the UK housing market.

Yesterday, Hometrack announced that house prices dropped by the most in seven years last month.

The GfK consumer confidence survey is due for release tomorrow evening. The drop in retail sales suggests that consumer spending will take a big hit as well, dragging the British pound lower.

More bad news out of Australia and New Zealand

The Australian, New Zealand and Canadian dollars all fell under the weight of broad dollar strength and lower commodity prices.

However, news out of Australia and New Zealand has also weighed on the currencies.

Leading indicators in Australia dropped 0.1% in May, reflecting a gradual slowdown in the Australian economy.

The big news however was from New Zealand, where a finance company has suspended withdrawals and new investments.

They are not first to do so, Canterbury Mortgage Trust, New Zealand's second largest mortgage fund announced similar measures last week.

Looking ahead, we continue to expect the New Zealand economy to deteriorate.

Canada has industrial product and raw material due for release tomorrow - inflation should remain hot.

USD/JPY hits one month high

The US dollar hit a one month high against the Japanese Yen on an intraday basis.

Despite the 266 point rally in the Dow Jones Industrial Average, which completely erased the prior day's drop, the only Yen crosses to follow suit were USD/JPY and CAD/JPY.

Japanese economic data was mixed with the jobless rate rising, but household spending beating expectations.

Despite the improvement, Japanese retail sales are still negative, reflecting the problems in the overall economy.

Labour cash earnings are due for release this evening, but as usual, Japanese data should only have a limited impact on the Yen.