Dollar flat after retail sales report

NEW YORK (CNNMoney.com) -- The dollar was little changed against rival currencies late Wednesday after reports on retail sales and the labor market raised bets that the Federal Reserve will hold interest rates steady.

What prices are doing: The dollar was flat versus the euro at $1.450 and rose a modest 0.02% against the British pound to $1.633. The greenback was up 0.01% against the yen at ¥91.22.

What's moving prices: Retail sales fell 0.3% in December after an upwardly revised 1.8% the month before, according to the Commerce Department.

The decline surprised analysts who had expected a 0.5% increase, according to consensus estimates gathered by Briefing.com.

Sales outside the auto sector fell 0.2% last month, versus a forecasted 0.3% gain.

Separately, a government report showed the number of Americans filing first-time claims for unemployment benefits rose more than expected last week, while the number of those filing continuing claims declined.

There were 444,000 initial jobless claims filed in the week ended Jan. 9, up 11,000 from a revised 433,000 the previous week, the Labor Department said in its weekly report. A consensus estimate of economists surveyed by Briefing.com expected new claims to rise to 437,000.

The government also said 4,596,000 people had filed continuing claims in the week ended Jan. 2, the most recent data available. That's down 211,000 from the preceding week's revised 4,807,000 claims.

What analysts are saying: Thursday's reports fueled speculation that the Federal Reserve will hold interest rates at historic lows near 0 as the economy remains vulnerable and weighed on the dollar.

"The U.S. dollar fell aggressively following the horrid retail sales figures," said Kathy Lein, director of currency research at GFT. "Weak consumer spending coupled with the disappointing labor market numbers last week guarantee almost no action by the Federal Reserve before the summer."

Meanwhile, the European Central Bank (ECB) announced plans to hold interest rates steady as expected. Traders are now awaiting comments later this afternoon from ECB president Jean-Claude Trichet.

"If Mr. Trichet sounds at all cautious about the prospects of Euro Zone growth or worse lowers his forecasts for 2010, the euro could come under further pressure as the day progresses," said Boris Schlossberg, director of currency research at GFT.