Dollar Weakened After Trump Adviser Called Euro “Grossly Undervalued”

The dollar is down against all of its major rivals Tuesday afternoon, but has begun to pare its losses in the afternoon. The U.S. currency dropped after Peter Navarro, the head of President Trump’s National Trade Council, stated that the Euro is “grossly undervalued” during an interview with the Financial Times.

Navarro stated that that the euro was like an “implicit Deutsche Mark.” He went on to say that Germany is one of the main hurdles to a trade deal between the U.S. and the European Union.

Meanwhile, U.S. economic data also failed to impress this morning. After reporting U.S. consumer confidence at a fifteen-year high in the previous month, the Conference Board released a report on Tuesday showing a drop in consumer confidence in the month of January. The Conference Board said its consumer confidence index fell to 111.8 in January from a revised 113.3 in December. Economists had expected the index to dip to 112.2.

Chicago-area business activity was nearly flat in the month of January, according to a report released by MNI Indicators on Tuesday. MNI Indicators said its Chicago business barometer dropped to 50.3 in January from a revised 53.9 in December, hitting its lowest level since last May.

While a reading above 50 indicates continued growth in Chicago-area business activity, economists had expected the barometer to climb to 55.3.

The dollar tumbled to $1.0811 against the Euro Tuesday, its lowest level since early December, but has since rebounded to around $1.0795.

Eurozone economy expanded at a slightly faster pace at the end of 2016, while a surge in energy prices led inflation to a four-year high, raising questions about the degree of stimulus that is actually needed for the currency bloc.

Gross domestic product grew 0.5 percent quarter-on-quarter in the final three months of 2016, faster than the revised 0.4 percent expansion seen in the previous quarter, a flash estimate from Eurostat showed Tuesday.

Economists had forecast the growth rate to improve to 0.4 percent from the third quarter’s initially estimated 0.3 percent expansion.

The Eurozone unemployment rate fell to the lowest in more than seven years in December, Eurostat said Tuesday. The jobless rate dropped to 9.6 percent in December from revised 9.7 percent in November. This was the lowest since May 2009.

Eurozone inflation accelerated strongly in January, mainly led by energy prices, to exceed economists’ expectations, while the core figure held steady, preliminary data from Eurostat showed Tuesday. The consumer price index rose 1.8 percent year-on-year following 1.1 percent increase in December. Economists had forecast 1.5 percent inflation.

Economists had forecast the rate to remain unchanged at November’s originally estimated rate of 9.8 percent.

Germany’s retail sales declined unexpectedly in December, provisional data from Destatis revealed Tuesday. Retail sales fell 0.9 percent in December from November, confounding expectations for an increase of 0.6 percent. This was the second consecutive decrease but slower than November’s 1.7 percent drop.

Germany’s unemployment rate declined in January, the Federal Labor Agency reportedly said Tuesday. The jobless rate fell to 5.9 percent in January from 6 percent in December. The rate was expected remain unchanged at 6 percent.

Germany’s unemployment rate remained unchanged in December though the number of those without jobs declined, figures from Destatis showed Tuesday.

The seasonally adjusted jobless rate, based on ILO norms, was 3.9 percent, unchanged from November. The number of unemployed fell by 1.8 percent, or roughly 27,000 persons month-on-month to 1.68 million. The yearly decline in the figure was 10.6 percent.

France’s economy expanded at a faster pace in the fourth quarter on consumption and investment, the first estimate from the statistical office Insee showed Tuesday. Gross domestic product grew 0.4 percent sequentially, following a 0.2 percent expansion seen in the third quarter. The quarterly growth came in line with expectations.

France’s consumer spending decreased unexpectedly in December, after rising in the previous two months, figures from the statistical office INSEE showed Tuesday.

Consumer spending fell 0.8 percent month-over-month in December, reversing a 0.6 percent rise in November, which was revised up from 0.4 percent.

Meanwhile, economists had expected a 0.2 percent increase for the month.

The buck reached an early high of $1.2408 against the pound sterling Tuesday, but has since retreated to around $1.2575.

U.K. mortgage approvals rose to a nine-month high in December, the Bank of England reported Tuesday. Approvals for house purchase were 67,898 versus 67,461 in November. This was the highest since March, when approvals totaled 70,089. Economists had forecast approvals to rise to 68,900.

Consumer confidence in the United Kingdom continued to be fragile in January, although less than expected, the latest survey from GfK revealed on Tuesday with an index score of -5. That beat expectations for -8 and was up from -7 in December.

The Bank of Japan maintained its monetary policy as widely expected at its first meeting of this year on Tuesday and upgraded its economic outlook, while leaving its inflation forecast unchanged.

Governor Haruhiko Kuroda and his board members on Tuesday decided by a 7-2 vote to maintain the central bank’s target of raising the amount of outstanding Japan government bond holdings at an annual pace of about JPY 80 trillion.

The BoJ board also decided to maintain the -0.1 percent interest rate on current accounts that financial institutions maintain at the bank.

In the Outlook for Economic Activity and Prices, the bank said the economy is likely to continue growing at a pace above its potential through fiscal 2018.

For the current fiscal, the bank projected 1.4 percent growth instead of 1 percent forecast in October.

The BoJ upgraded its growth outlook for fiscal 2017 to 1.5 percent from 1.3 percent and that for the fiscal 2018 to 1.1 percent from 0.9 percent.

The greenback fell to nearly a 2-month low of Y112.074 against the Japanese Yen Tuesday, but has since bounced back to around Y112.675.

The unemployment rate in Japan came in at a seasonally adjusted 3.1 percent in December, the Ministry of Internal Affairs and Communications said on Tuesday, which was in line with expectations and unchanged from the November reading.

The number of employed persons in December was 64.66 million, an increase of 810,000 or 1.3 percent on year.

The average of household spending in Japan was down 0.3 percent on year in December, the Ministry of Internal Affairs and Communications said on Tuesday, coming in at 318,488 yen. The headline figure topped expectations for a decline of 0.9 percent following the 1.5 percent decline in November.

Industrial production in Japan climbed 0.5 percent on month in November, the Ministry of Economy, Trade and Industry said on Tuesday. That beat forecasts for an increase of 0.3 percent following the 1.5 percent jump in November.

Japan’s housing starts growth eased unexpectedly in December to its lowest level in four months, data from the Ministry of Land, Infrastructure, Transport and Tourism showed Tuesday. Housing starts climbed 3.9 percent year-over-year in December, much slower than the 6.7 percent spike in November. In contrast, economists had forecast the growth to improve to 8.3 percent.

Japan’s small business confidence declined for the first time in five months in January, survey data from Shoko Chukin Bank showed Tuesday. The small business confidence indicator fell to 48.3 in January from 48.8 in the previous month. In November, the score was also 48.3.

The material has been provided by InstaForex Company –

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