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Dollar continues its ride

US December retail sales dropped -2.7% vs -1.2% forecast as the high street continues to show consumers lack of confidence in the econonomy.

The US Beige book gathers anecdotal information on current economic conditions in its district through reports from Each Federal Reserve Bank and branch directors and interviews with key business contacts, economists, market experts, and other sources.  Released yesterday this indicator showed widespread economic weakness and that this was expected to continue. The Euro dollar traded a range of 1.3094 -1.3398 and GBP/ Dollar 1.4493 -1.4706.

The Euro rallied in Asian trading time yesterday but found it hard to stay above 1.3300 as German GDP was released at 1.3% vs 2.5% y/y and Eurozone December inflation forecast was down 0.1% vs 0.5% previously.  Pressure on the Euro was also applied amid heightened concerns over the fiscal position of economies on the periphery of the Eurozone such as Greece, Portugal and Ireland.

The UK stock market took a hit yesterday with UK bank shares touching a 13 year low, wiping out the post Xmas and new year gains. Barclays fell 14% and HSBC fell 8%, the FTSE 100 fell 5% to close at a5 week low. Overall the GDP/USD traded with a low of 1.4493 and a high of 1.4706 before closing the day at 1.4600 in the New York session.

All focus today will be on the ECB rate announcement at 12.45 GMT. Expectations are that they will cut by 0.5% to 2.0%.