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    European Session – Euro holds above 1.07, dollar shrugs off weak US retail sales, oil below $41

    The euro was on course to end the week higher against the dollar after a rally to above 1.08 yesterday but gains were given back today after Eurozone GDP data which confirmed sluggish growth activity in the region during the third quarter. The overall flash estimate rose 0.3% in the three months through September, down from the 0.4% growth in the previous quarter. The consensus was for a 0.4% growth forecast. Germany also reported softer growth as its Q3 GDP came at 0.3% (in line with forecasts) after expanding at 0.4% in the previous quarter.

    Today’s GDP data support the outlook for additional stimulus from the ECB next month. Just yesterday ECB President Mario Draghi’s dovish comments raised expectations of more QE or negative rates due to low inflation and faltering economic growth. This view will be a drag on the euro, which fell to as low as 1.0721 today after failing to rise past a session high of 1.0807.

    Data out of the UK today showed September construction output fell 0.2% in the month of September, well below the forecast for a 1.5% gain. August was revised higher but still posted a 3.4% drop. The data did not have much impact on the pound. Sterling is set to end the week higher versus the dollar. It mostly held in a 1.5198 – 1.5231 range in today’s European session except for a brief spike to 1.5263.

    US retail sales was the main event of the day. The headline retail sales number rose just 0.1% in October versus a gain of 0.3% expected. September’s 0.1% rise was revised down to zero. Meanwhile, core retail sales excluding automobiles, gasoline, building materials and food services rose 0.2% after an upwardly revised 0.1% gain in September. Today’s weaker data will not likely impact the Fed policy outlook and market expectations are for a December rate hike.

    The dollar dipped versus the yen in a knee-jerk reaction to the retail sales data, touching 122.43 before bouncing back up to 122.77 yen. The greenback moved higher after the University of Michigan consumer sentiment index was released. The preliminary reading for November came in at 93.1 beating a forecast of 91.5 and above the previous month’s 90.

    Oil prices continued to decline for an eight trading day, reaching $40.66.

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