The euro continued to pressure the dollar on Friday, a day after the European Central Bank returned its focus to inflation despite pronounced economic weakness on the periphery of the euro area.
The region appears to have dodged another bullet with this week’s successful bond auctions by debt-ridden Spain, Italy, and Portugal.
It was feared borrowing costs would rise to prohibitive levels but spreads came down a bit on long-term debt, buying the profligate nations more time to get fiscal houses in order.
And while economic growth is expected to remain exceedingly sluggish outside of Germany, ECB President Jean-Claude Trichet sent a clear message to the markets on Thursday — policy makers are determined to fight inflation regardless of growth prospects among certain member states.
The euro jumped to a monthly high of $1.3455 versus the dollar in very early dealing before leveling off to $1.3375. The euro began the week at a 4-month low of $1.2873.
In economic news from the US, government figures showed retail sales rose 0.6 percent in December, even as consumer prices jumped 0.5 percent.
Yesterday on CNBC, Federal Reserve Chairman Ben Bernanke said he expects 3-4% US economic growth for 2011.
“Now that’s not going to reduce unemployment at the pace we’d like it to, but certainly it would be good to see the economy growing and that means more sales, more business,” Bernanke told Steve Liesman.
The euro continued its comeback against the Swiss franc, rising to CHF 1.2950. The euro hit a record low of CHF 1.24 on New Year’s Eve.
The single currency also edged higher against the yen, touching a 4-week high of Y110.91