The difficulties facing the smaller economies in the European Union have made daily headlines for months now. Within the past year, several EU-member nations have been on the wrong end of a credit ratings downgrade, and given current conditions, the likelihood of further cuts grows with each passing day.

U.S. Retail Sales increased more than expected in February. According to the Commerce Department, consumers pushed sales higher by 0.3 percent, while sales excluding automobiles, rose 0.8 percent.

“There is slow re-engagement from consumers,” Ethan Harris, head of North America economics at Bank of America- Merrill Lynch Global Research in New York, said before the report. “As the economy slowly improves and the labor market stabilizes, people get a little less conservative in their spending.”

European Union insiders say that EU finance ministers will meet next week to determine a plan of action for providing funds to help Greece cover its widening deficit. Discussions will be held to debate a scheme that would see either the sale of bonds backed by EU government, or a direct offer of loans to help cover Greece’s shortfall.

Pound heads higher in forex trading

The sterling is strengthening in currency trading on the FX market today. Indeed, the pound is heading higher in forex trading as risk appetite makes an appearance.

The EUR has fallen 10% vs. the dollar in 4-month’s and is now contained in this narrow monthly range. Is this the fair value of the EUR? It’s lost 5% this year over European sovereign debt problems and the possibility that Trichet will fall behind Bernanke in hiking rates. The contagion scenario, referring to Spain and Portugal, has traders leaning left of center in their EUR positions. However, the record ‘short’ bets are in danger of feeling a ‘whiplash effect’. A natural healthy cleansing of the ‘weaker shorts’ is on the horizon.

Kathy Lien - The U.S. labor market report was released this morning and the data was much better than everyone had anticipated.

 Who Has Lost More Jobs - Men or Women?
By: Kathy Lien

The US Commerce Department said today that a 6.6. percent decline in imports in January, resulted in a reduction of the US trade deficit to $37.3 billion, from $39.9 billion in December. A dramatic reduction in imports of oil and foreign automobiles was the main reason for the decline. The trade deficit decline caught many analysts by surprise; earlier predictions called fro a widening of the trade gap to $41 billion.

The Royal Bank of Canada – the country’s largest financial institution – released a report today predicting that Canada’s economy will grow by 3/1 percent this year, followed by a 3.9 percent growth in 2011. The report cites the positive impact of the government’s stimulus plan spending, a stable credit market, and an expected increase in consumer spending will be the primary forces helping to expand the economy over the next two years.

One of the pitfalls of forex blogging (or all financial reporting for that matter) is that it’s inherently after-the fact. In other words, any information about the past – while relevant – is inherently useless, since it has theoretically already been priced into the asset (or currency in this case). Before I begin my post on the Pound’s recent decline and the factors that wrought it, then, I wanted to offer the caveat that in analyzing past events, we must simultaneously look to the future.

Currency trading with the Swiss franc

The Swiss National Bank appears to be intervening -- albeit it on a very small level -- in forex trading again. The SNB has been intervening on occasion since last year, when it announced a policy meant to keep the franc lower against the euro in forex trading.