Market Review - 17/01/2014 20:18GMT

Euro falls to fresh 7-week low

The single currency tumbled to a fresh 7-week low at 1.3517 on Friday due to renewed dollar's strength after the release of stronger-than-expected U.S. industrial output, supporting the the view that U.S. economy is improving enough to keep the Federal Reserve's stimulus-reducing measures on track.

U.S. industrial output rose by 0.3%, its fastest clip in 3-1/2 years in the fourth quarter. U.S. New homes last month dropped 9.8%, the largest percentage decline since April, but housing starts were coming off a multi-year high in November. University of Michigan consumer confidence came in weaker-than-expected at 80.4 versus the economists' forecast of 83.5.

The greenback traded inside a tight range of 104.20-104.47 against the Japanese yen. However, the British pound rallied from intra-day low at 1.6309 to as high as 1.6459 after the release of unexpectedly strong U.K. retail sales data, which rose by 2.6% m/m and 5.3% y/y, better than the forecasts of 0.3% m/m and 2.5% y/y respectively with previous readings revised to 0.1% n 1.8%.

In other news, BoE's Broadbent said 'signs that headwinds facing wage growth are starting to abate; good reason to expect business investment growth to accelerate; highly unlikely we'll see anything like the relative price headwinds of past 4 years, opposite more likely; productive growth, euro zone will be key to determining UK recovery path.' Broadbent added later that "UK productivity doesn't look to have been good in H2 2013, but expect a pick-up."

Fed's Lacker says " tapering should continue and that recent data far fm what would be needed to change his view; deflecting monetary policy from price stability mission would be misguided."

Data to be released next week:

U.K. Rightmove house prices , China business climate, entrepreneur confidence, GDP, industrial production, fixed assets, retail sales, Japan capacity utilization, industrial production, Germany PPI on Monday. New Zealand, U.S financial markets are closed due to public holiday.

New Zealand CPI, Germany ZEW survey current situation, survey expectations, U.K. CBI industrial trend, Canada wholesale sales, U.S. IMF economic outlook on Tuesday.

Australia Westpac consumer confidence, CPI, Japan rate decision, all industry index, leading indicators, U.K. MPC minutes, claimant count, ILO unemployment rate, Avg. earnings, PSNCR, public sector Net knowing, Italy current account, Swiss Zew index, US Redbook retail sales, Canada BOC rate decision, on Wednesday.

New Zealand business manufacturing PMI, ANZ consumer confidence, China HSBC manufacturing PMI, Japan BOJ monthly economic report, France business climate, France manufacturing PMI, service PMI, EU current account, manufacturing PMI, service PMI, consumer confidence, U.K. CBI distributive trades, Canada retail sales, U.S. Chicago Fed index, jobless claims, markit PMI, house price, US existing home sales, leading index on Thursday.

U.K. BBA mortgage approvals, Canada CPI on Friday.