Euro a touch softer
Notwithstanding a notable enough sell-off in equity markets yesterday it wasn’t a one-way street for the dollar as if often the case in such an environment, with the US currency gaining some ground against the euro but edging lower against a generally firmer pound. It is trading at $1.0940 and $1.2690 respectively this morning, with EURGBP down at about £0.8630.
While the Fed Chair, Jerome Powell, fuelled expectations for rate cuts with comments he made following last month’s monetary policy meeting, the minutes of the meeting released yesterday gave no indication such a move is imminent. Indeed the minutes note that policy will need to remain restrictive “for some time” to ensure inflation returns sustainably to the 2% target, although they also warn of the risks to economic activity from keeping rates too high for too long.
Job openings in the US fell for a third consecutive month to in November (to the lowest level in more than two years) indicating labour demand is continuing to moderate, something the Fed wants to see to be more confident of inflation getting back to target. Separately, manufacturing remains in contractionary territory according to the latest ISM index, which was below the key 50 level again in December albeit up a touch from November, while input price pressures facing manufacturers eased further.
Inflation in France edged up to 4.1% in December (from 3.9% in November) according to the preliminary estimate released earlier this morning. We’ll get a flash estimate for Germany later today, with energy price-related base effects expected to have resulted in a sizeable jump in headline inflation last month – to 3.9% from 2.3% in November according to the consensus forecast – providing some justification for Christine Lagarde’s view that the ECB mustn’t “lower our guard” on inflation.
Other economic due today include services PMIs in the main economies (final readings for December); consumer credit, mortgage lending and mortgage approvals in the UK; and the ADP employment report and the regular weekly jobless claims in the US.