Euro dips but recovers against dollar
Similar to last week, the euro had a somewhat volatile days trading on the opening day of this week. The currency spent much of last week sliding to the dollar but staged a small recovery on Thursday and Friday to finish the week around $1.08, albeit down from $1.0860 at the start of last week. Yesterday, the single currency dipped again, down to around $1.0780, but recovered late on and starts off again at around $1.0810 this morning. In contrast, the euro has been trading in a fairly narrow range to sterling, continuing to trade around 83.3p. Sterling remains below $1.30 to the dollar, at $1.2970 this morning.
It was a positive day for equities, the S&P 500 gained 0.3% for the day, kicking off the week on a good note following 4 days of daily losses in the past 5 days. US equities could be in for a volatile couple of weeks as more corporate earnings reports come in while there is key economic data – including 3Q GDP and October payrolls – due and, of course, the US presidential election on November 5th. In Government bond markets, US 10-year yields gained about 4bps, to just below 4.3% while equivalent German 10-years were more or less unchanged at 2.3%. The price of oil slid, with West Texas and Brent measures down about 6% each for the day, following what commentators believe was a measured Israeli response to Iranian attacks, increasing hopes of easing hostilities in the region.
There was little data yesterday but there is some key data coming up this week. Amongst other things, in both the Euro Area and the US, the first estimates of Q3 GDP will be released. It should show the contrasting positions of both economies. The forecast for the Euro Area is for an increase of 0.2% quarter-on-quarter, following on from an increase of 0.2% in Q2. However growth in the zone is being held back by the poor performance of its largest economy, Germany, which is expected to post a second consecutive quarterly fall of 0.1% thus putting it into a technical recession. The slump in the German manufacturing sector continues to be a weak spot for Euro Area activity. In the US, quarterly GDP growth in Q3 is expected to be a solid 0.7%, following a similar gain in Q2, spurred on by robust personal consumption which contrasts to anemic consumption growth in Europe. The data will also highlight the differing positions the ECB and Fed find themselves in, as with inflation apparently tamed in both economies, one central bank needs to spur growth and avoid recession while the other needs to manage a steadily growing economy.
On the agenda this week, plenty of data including Euro Area confidence data and Q3 GDP as well as flash CPI and unemployment. In the US, the main data will be Q3 GDP, personal income and spending and PCE inflation while we get payrolls on Friday.