The greenback struggled against the yen and euro at the start of the week amid a dearth of fresh US economic news. The currency also tumbled to a new all-time low against the Swiss franc. Speculation that the Fed may step in to cut interest rates before the next policy meeting at the end of the month dragged the dollar lower. The market is now fully pricing in a 50-basis point rate cut after last week’s dovish tone from Chairman Bernanke, in which he said that the FOMC would adopt “substantive additional action” to prop the economy.
US economic reports and Fed Chairman Bernanke’s Congressional testimony will drive the markets this week. Retail sales will be released on Tuesday, and are expected to report disappointing results from December – with a flat monthly reading in both the headline and ex-autos, down from 1.2% and 1.8%, respectively. Also due out tomorrow are the December PPI figures, both headline and core seen falling to 0.2% m/m. Traders will closely look at the rest of this week’s data – consisting of industrial production, CPI, housing starts, building permits, Fed Beige Book, Philadelphia Fed index, and the University of Michigan consumer sentiment, for further indication of whether a US economic recession is forthcoming.
read more:Greenback Woes Linger
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