USD

The US dollar lost ground to its peers as risk appetite appeared to return to the markets.

Bond yields ticked lower while equities and commodities chalked up gains, leaving the safe-haven currency to decline. Up ahead, FOMC members Dudley, Williams, and Mester have testimonies scheduled so their monetary policy remarks could determine where the dollar might be headed next.

EUR

Euro zone economic data turned out weaker than expected in the previous London session as the German IFO business climate index fell from 117.6 to 115.4. The ECB meeting minutes contained a few hawkish remarks but the central bank’s hesitation to commit to a tightening plan has led to some euro weakness. Euro zone final CPI readings are lined up today.

GBP

The pound managed to hold its ground despite weaker than expected UK data. The Q4 GDP estimate was revised down from 0.5% to 0.4% instead of being kept unchanged as expected while the CBI realized sales index fell from 12 to 8 versus the estimated rise to 13. There are no reports due from the UK today but BOE MPC member Ramsden has a speech due.

CHF

The franc was also able to rake in some gains as it took advantage of dollar weakness to score some risk-off flows. There were no reports out of the Swiss economy yesterday and none are due today so market sentiment could remain the biggest driver.

JPY

The yen was a big winner as dollar weakness led risk averse traders to the lower-yielding yen.There were no major reports out of Japan then while the national core CPI was released earlier today. A stronger than expected 0.9% gain was reported versus the 0.8% consensus.

Commodity Currencies (AUD, NZD, CAD)

The Loonie suffered a sharp drop upon seeing Canada’s retail sales report, as the headline figure fell 0.8% in December while the core reading showed a 1.8% slump. New Zealand, on the other hand, posted stronger than expected quarterly spending data. Headline retail sales rose 1.7% while the core reading had a 1.8% gain. Canada’s CPI readings are due next and more disappointments could spur another leg lower for the Loonie.

By Kate Curtis from Trader’s Way