The foreign exchange market appears to have entered a consolidative phase as it waits for fresh incentives. Slightly firmer short term rates in the euro zone and U.K. appear to be helping cap the U.S. dollar, while ongoing concerns about the European debt crisis and the potential stagflationary conditions in the U.K. deter enthusiastic buying for the euro and sterling.
Market talk suggests Asian reserve managers continue to diversify some of their recent dollar purchases into euro, but of course this is difficult to verify. Sterling's advancing streak extended into its ninth consecutive session Wednesday, but is struggling today to maintain the upside momentum. The CBI trends survey for January was much weaker than expected (-16 vs consensus -2) and Friday's report of December retail sales may similarly drive home the point of weakening growth despite the price pressures.
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Magdalena Wróbel Connie Nielsen Melissa George Cameron Richardson Chandra West
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