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    European Session – Dollar reverses gains after durables goods orders but up on the week so far

    The pound bounced off one-week lows versus the dollar as the Brexit and Brussels-driven weakness was overturned by UK data this morning. Retail sales in February was not as bad as expected and posted a 0.4% decline month-on-month versus a 0.7% drop expected. This followed from a 2.3% gain in January. Meanwhile, the annual figure showed a 3.8% gain as expected.

    Sterling rebounded off $1.4056 to rise to a session high of $1.4146. The stronger pound pushed the euro off a 15-month high it reached earlier today at 0.7945 pence.

    The euro marked a fourth consecutive day of declines against the dollar. Data out of Europe today consisted of the German Gfk consumer sentiment index which fell to 9.4 heading into April from 9.5 in March. It was expected to remain unchanged at 9.5.

    The dollar rose to a one week high against the yen early in the European session but reversed lower after disappointing US economic data released today. However, the greenback is up against the yen on the week so far, as it is being supported by expectations of more rate hikes this year, following hawkish rhetoric by Fed policymakers this week. The Presidents of the St. Louis and Philadelphia Federal Reserve Banks both supported more rate hikes for this year but their optimistic view of the US economy was dampened by the softer US data today.

    The dollar index has gained around 1.2% this week. Against the yen, the US currency rose to a high of 113 yen before sliding to 112.40 yen in reaction to US data on jobless claims and durable goods orders.

    The February report showed orders for durable goods fell for the third time in four months. There was a 2.8% drop, slightly less than the 2.9% decline expected. But January was downwardly revised to show a smaller gain of 4.2% from a previously reported 4.7% increase. Revisions are also important to look at.

    Meanwhile, initial jobless claims increased in the week ending March 19 by 6,000 claims to a seasonally adjusted 265,000. This was lower than the forecast for claims rising to 268,000. The prior week’s claims were revised to show 6,000 fewer applications for jobless benefits.

    Oil is set for a weekly decline for the first time since early February. Prices fell sharply since yesterday’s release of data showing a bigger-than-expected increase in US crude oil inventories.

    Gold fell to a one-month low of $1,212.33 early in European trading before steadying around $1,220, as the broadly stronger dollar does not help the precious metal.

    Looking ahead to Friday, the only major data to be released will be the revised estimate of US fourth quarter GDP. Markets are expected to be quiet due to the Good Friday holiday in many other markets outside the US and this would impact liquidity.

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