Dollar Slips as U.S. Economy Loses Momentum, Yen Rebounds

The U.S. economy is losing momentum and the release of weak data has sparked fears of a recession. This has led to a drop in U.S. government bond yields and weighed on the dollar. The yen has rebounded as traders bet on a shift away from ultra-loose monetary policy. European stock markets have also fallen as investors fret about the possibility of a recession. The surprise resignation of New Zealand Prime Minister Jacinda Ardern added to the global uncertainty, and oil prices fell as economic uncertainty persists. Investors will be closely watching the World Economic Forum and upcoming U.S. economic data for clues on potential future moves by central banks.

Weak U.S. Economic Data Sparks Recession Fears

U.S. data released on Wednesday showed retail sales fell by the most in a year in December and manufacturing output suffered its biggest drop in nearly two years, stoking fears that the world's largest economy is headed for a recession.

Drop in U.S. Government Bond Yields Weighs on Dollar

The figures prompted a sharp drop in U.S. government bond yields as investors bet the Federal Reserve would be unable to raise rates as high as previously expected and sought out safe assets. Analysts said the fall in yields, which makes dollar-denominated bonds less attractive, was one factor weighing on the greenback.

European Stock Markets Fall as Investors Fret About Possibility of Recession

European stock markets fell Thursday, following the weaker global sentiment as investors fretted about the possibility of a recession this year. This weakness in Europe has tracked the weaker global sentiment, with the blue chip Dow Jones Industrial Average closing over 600 points, or 1.8%, lower on Wednesday.

Investors to Watch World Economic Forum and U.S. Economic Data

Investors will be keeping an eye on the World Economic Forum in Davos, Switzerland, where European Central Bank chief Christine Lagarde is due to speak on Thursday. U.S. economic data will also be closely watched, with weekly jobless claims and housing figures due later in the day.

Oil Prices Fall as Economic Uncertainty Persists

Oil prices fell Thursday as uncertainty about the global economy and concerns over a potential recession weighed on demand prospects. Brent crude oil futures were down 0.5% at $58.73 a barrel, while U.S. West Texas Intermediate crude futures fell 0.3% to $54.75 a barrel.