Video for April 14th, 2008 (3 min 12 sec): G7 Boost For Dollar Doesn't Last; Pound Surges on Higher PPI

In the G7 meeting, finance ministers showed concern over "sharp fluctuations" in global currencies, and said that they "will continue to take appropriate actions, individually and collectively, in order to secure stability and growth in the economies."

EUR/USD - Initially, Dollar Benefits From G7 Message, Impact is Short Lived

The G7 meeting gave hopes that the ECB will intervene to prevent further dollar weakness. This market sentiment was reflected by the EUR/USD pair's large gap and drop in the opening hours of this week's session. The G7 statement's impact faded quickly, as the pair returned to the last Friday's market close by 2:00PM EST.

Traders realize that a coordinated effort will have to be led by interest rate cuts by the ECB, which seems unlikely. Until the ECB moves to cut rates, it will be hard to reverse current Dollar weakness. Better than expected industrial production data also helped to boost the Euro.

NZ Retail Sales Decline, Consumers Feel the Pinch

In other fundamental news, New Zealand retail sales showed a 0.7% decline in Feb. Consumers scaled back their spending as they are feeling the effects of rising food and gas prices and record-high interest rates.

US Retail Sales Higher Than Expected on Gas Sales

In the US retail sales surprised on the upside, increasing 0.2% on the month. However, most of these gains were due to a rise of gas purchased at gas stations. The data does not filter out inflation, meaning price increases and not volume were the culprit here. Core retail sales which exclude vehicles saw an increase of 0.1%.  

NZD/USD - Kiwi Pressured by Weak Retail Sales Data

As we saw against the Euro, the US Dollar gained across the board at the very beginning of this week's session on Sunday. The New Zealand Dollar-US Dollar pair however failed to close the gap, and is instead 50 pips lower than its Friday's close by 2:00PM EST. The poor retail sales figures pressured the kiwi, while US data was slightly better than expected.

UK Producer Prices Climb Above Expectations

GBP/USD - Pound Jumps on Higher Producer Inflation

The Pound strengthened on the stronger than expected producer inflation data. From a low in Sunday afternoon trading, the pair climbed to touch 1.9895, a rally of 200 pips. In NY trading, the Dollar recovered, and had pared those gains by about half.

GBP/JPY - Carry Trade Gains During European Session

Risk appetite was up during the European trading session. The GBP/JPY pair rose 200 pips, before turning south starting 11:00AM EST. Wachovia's posting of its losses hit the market in the morning and reduced risk appetite.

Upcoming Releases

Tonight New Zealand will reveal consumer price data for the 1^st quarter. The UK will post its RICS house price balance and BRC retail sales data in the evening, and follow that with consumer inflation data overnight.

The Euro-zone and Germany will post the ZEW measures of economic sentiment. Tomorrow morning the US has a busy day with producer inflation data, the "Empire" manufacturing index, treasury flows and a measure of the housing market market.