Investors are selling U.S. dollars this morning against all of the major currencies and this weakness drove the trade weighted dollar index dropping to its lowest level in 6 weeks.

Despite Janet Yellen’s comfort with the performance of the economy and her pledge to continue tapering asset purchases, investors are growing tired of the continued disappointments in U.S. economic data. In the month of January, industrial production dropped for the first time in 6 months by 0.3%. Not only was this also the steepest decline since August 2012, but capacity utilization also fell. Spare capacity is a big problem for many countries and one of the primary reasons why central banks have been slow to remove stimulus. However steady consumer confidence will give the Federal Reserve hope that the slowdown in the beginning of the year is temporary. Economists had been looking for a further decline in consumer confidence in February but the University of Michigan Consumer Sentiment Survey held steady at 81.2.

The best performing currencies today are the British pound, Australian and New Zealand dollars. The recent shifts in monetary policy by the Bank of England and Reserve Bank of Australia have been extremely positive for these currencies. Better than expected Eurozone GDP growth in the fourth quarter also drove EUR/USD higher today but the currency pair continues to struggle with 1.37, a level that it failed to clear at least 3 times this year. Stronger GDP numbers helped to drive euro above 1.37 temporarily but the breakout has not been convincing. However we have been watching the spread between German and U.S. yields very closely and the larger increase in German 10 year bond yields versus 10 year Treasury yields should be positive for the euro.

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