Dollar on the front foot
It may be a case of being wise after the event, but such is the nature of FX markets that it was almost inevitable the euro and sterling would re-visit their post-US elections lows against the dollar – of $1.0497 and $1.2597 respectively – at some stage. They broke down through these levels yesterday and are trading at around $1.0475 and $1.2575 respectively this morning, with weak French/German PMIs and soft UK retail sales (released a short while ago) adding to the downward pressure. EURGBP has been in a range of about £0.8260 to £0.8370 since the US election, albeit spending most of that time above the £0.83 level, and is trading at around £0.8330 at the start of play today.
US bond yields nudged higher yesterday, as the market pared back slightly expectations for Fed rate cuts, while both German and UK yields nudged down (the higher relative US yields supporting the dollar). Equity markets had a positive enough session, with European and US stocks up around half a percent on the day.
Consumer spending in the UK began the final quarter of the year on a soft note judging by the latest retail sales data. The show volumes fell by 0.8% in October, while September’s increase was revised down to 0.1% from the previous estimate of 0.3%. On a brighter note, consumer confidence picked up slightly in November according to GfK’s latest survey.
In the US, the number of new jobless (unemployment) claims fell again last week but the number of continuing claims continued to trend higher, suggesting people are remaining unemployed for longer. In a speech earlier this week, Fed Governor Cook said the ‘the broader trend I see is that job growth is solid but perhaps not quite strong enough to keep unemployment at the current low rate.”
Economic data due today include flash PMIs for the Euro area – the French and German PMIs both fell in November, remaining in contractionary territory, according to this morning’s releases – UK and the US, while a final reading for consumer confidence in November is due in the US also. There are a number of ECB members scheduled to speak today, including its President, Christine Lagarde.