Euro strengthens against the dollar as data spurs hopes of global recovery

Having gained steadily throughout European trading, demand for the dollar ebbed away yesterday afternoon following positive economic figures allowing the euro to strengthen.

• The dollar initially jumped after a pair of U.S. economic reports said retail sales rose 2.7% and producer prices rose 1.7% in August, both more than economists expected.
  
• Retails sales were spurred on by the government’s “cash for clunkers” scheme, though even without cars, sales still increased by 1.1%, reinforcing hopes that the economy is on the path to recovery.
  
• Additionally, New York’s Empire State manufacturing index revealed another growth in output, further strengthening demand for the greenback.
  
• However, the dollar abandoned these gains, touching a fresh 2009 low against the single currency, as investors moved into riskier assets in the wake of the positive data.
  
• In choppy trading, the dollar was unable to sustain its burst of strength, as the euro continued to consolidate the strong position it has accrued over the last fortnight.
  
• The CPI inflation rate is out in the US today at 13:30BST, with analysts forecasting the rate to hold steady at 0.1%.