Dovish Trichet boosts Safe-Haven USD and YEN

Earlier this morning, the US and the Euro-zone posted a sequence of very important economic data releases and statements which are currently influencing Forex.

US advanced retail sales for December surprised the markets by registering a fall of 0.3% against an expected rise of 0.5%. In addition, the US Initial Jobless Claims rose to 444K compared to an expected 437K whilst the US Import Price Index recorded no change.

As expected the European Central Bank left its Benchmark Rate at 1%. However, the ECB President, Trichet, did make a series of dovish comments after this announcement that are impacting the markets. Among other remarks, he stated that he supported Bernanke about the importance of a strong dollar as well as advising that bank supervision should be independent of government interference. He also added that some Euro-zone member countries had made reforms but that others such as Ireland and Greece still need to make further progress.

As a result of the Trichet comments and the poor US retail figures, the safe-haven currencies such as the YEN and USD have surged against the higher yielding ones. The EURUSD has dropped by 50 pips and currently sits at 1.4470. The USDYEN and EURYEN have also fallen with the former currently at 91.10 whilst the latter has plunged by over 100 pips posting 131.90 currently.

Great Britain also announced this morning that UK household spending had fallen during 2008 as its citizens struggled to cope with inflation and the credit crisis. However, the GBPUSD has still managed to sustain its present bull channel recording 1.6295 presently.