U.S. Market February 14, 2001

The dollar had its biggest gain in six weeks against the euro, as the U.S. reported stronger- than-expected January retail sales and Federal Reserve Chairman Alan Greenspan said the U.S. slowdown will likely be limited. Greenspan did caution that downside risks remain in the US economy. In US economic releases the January retail sales rose 0.7 percent from 0.1 percent the month before, suggesting that the U.S. economy was recovering from its recent slowdown. The US Dollar rose 1.5 percent to .9178 cents per euro, from .9312 late yesterday in New York trading. The Euro was also hampered by soft German data which showed that Germany’s retail sales fell 0.8 percent from November, the fourth straight drop. The British Pound was lower during NY trading after release of subdued British inflation data. The British underlying inflation, excluding mortgage interest payments, rose a yearly rate of 1.8 percent in January, its lowest level since records began in 1976. Cable tested below the 1.4500 level before recovering to 1.4530.

The Yen firm following the release of the strong US retail sales data. The Japanese economy is teetering on the brink of recession and its export market has largely depended on a strong US consumer market. Bank of Japan kept its economic assessment unchanged in its monthly report. But BOJ warned more caution was warranted on risks to recovery given global economic slowdown.

Market now eyeing the forthcoming G-7 summit this weekend. Finance ministers and central bank governors of the Group of Seven (G7) nations gather in Palermo, Sicily, on Saturday for a one-day meeting.

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