By Geoffrey Smith
Investing.com – The dollar was little changed at the start of trading on Wednesday in Europe, with the market appearing to settle in anticipation of the release of US fourth quarter data on Thursday.
By 9:05 AM ET (05:05 GMT), the , which tracks the currency against a basket of six other major currencies, was up less than 0.1% to trade at 101.715.
The numbers will shed some more light on the likelihood of a US recession later this year, something that looks more likely since last week’s December data and a succession of grim business surveys from banks in the Federal Reserve of and of New York.
The US Treasury a yield is now nearly 120 basis points below the a bond yield, an investment grade that has never in the last 100 years failed to indicate a recession. More anecdotal data, such as Tuesday’s report from 3M (NYSE:)—a diverse supplier of goods to a wide range of sectors of the economy—also portends more difficult times ahead. Another mainstay of the broader economy, Microsoft (NASDAQ:), also reported its slowest quarterly sales growth in years and has warned of worse times ahead.
The pound sterling was in the spotlight earlier in the day today, after prices fell significantly below expectations, suggesting that the price plunge in recent weeks has finally passed through to the Manufacturing sector. Input prices fell 1.1% in December, bringing the annual rate down from 19.2% to 16.5%, its lowest level in the last 10 months. The data for prices of the has fallen only 0.8%, a sign that companies still have some capacity to defend their profit margins despite the weakening of the economy.
It has fallen by 0.1% to $1.2322.
Contrasting with Australian data during the Asian session, UK data has indicated that consumer inflation remains well above expectations. Inflation accelerated to 7.8% in the fourth quarter, from 7.3% three months earlier, making it more likely that the country will have to adjust its monetary policy again. This seems even more likely given the rebound in overseas demand for Australian goods due to China’s economic recovery this year.
The is up 0.8% to the 0.7122 level, a fresh five-month high.
Market attention will likely focus on Germany, where the will be released at 10:00 AM ET. Analysts expect a slight improvement in the general index to 90.2 points, which would mean reaching a seven-month high.
The has run into stiff resistance around $1.0930 in recent days, after rising sharply on expectations that the EC’s interest rate differential against the US will narrow this year.