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    European Session – Euro briefly flirts 1.10 before falling as dollar rises on jobless claims data; pounds hurt by retail sales

    The euro was one of the biggest movers out of the majors today as it jumped above the key 1.10 level to reach a one week high of 1.1017 by mid-European session trading. Data helped support the single currency after an unexpectedly large decline in Spain’s unemployment rate. Also supporting the euro was the successful Greek parliamentary vote late on Wednesday. The passage of a second set of reform measures now turns the focus towards the start of negotiations over a financing programme for Greece. This bailout worth around 86 billion euros is expected to be finalized by around mid-August.

    The fading of Greece’s immediate financial problems have helped investors shift their focus on central bank policies and the divergence of these between the ECB and the Fed. There are growing expectations the US central bank will raise interest rates soon.

    The euro gave back some of its gains against the dollar as the US session came around, to fall to 1.0950 after the dollar was boosted by positive initial jobless claims numbers. The next immediate risk for the euro will be Friday’s release of flash PMI’s from France and Germany as well as the whole Eurozone.

    Sterling fell against the euro and the dollar after surprisingly poor UK retail sales numbers. Data showed an unexpected dip last month as British consumers bought fewer household goods, pushing the annual rate of spending growth for the quarter to its lowest in more than two years. The unexpected fall of 0.2% confounded estimates that sales would rise by 0.4%. The annual rate fell to 4% from 4.7%, against estimates it would rise to 4.8%. Excluding fuel, sales were also down by 0.2%.

    The pound fell as low as 1.5583 against the dollar after the data before steadying. It fell another leg lower to 1.5534 after the dollar jumped on jobless claims data.

    The dollar reversed all of its losses against the yen to rise back above 124.00 to 124.17 after US initial jobless claims fell to the lowest level in more than 40 years.

    The number of American workers filing applications for jobless benefits decreased by 26,000 to a seasonally adjusted 255,000 in the week ended July 18, giving signs of a strengthening labor market. Today’s number puts new claims at their lowest since 1973. The Fed closely watches labour market data for considering when to raise interest rates. There is growing speculation that the US central bank will hike rates in September.

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