Euro under pressure

The euro lost ground against the dollar for a second week running last week, amid generally soft Euro area economic data and continuing solid numbers on the whole out of the US, closing about one and a half cents lower at just over $1.08 (which compares to a 2020 to date high of over $1.12 set in the opening week of the year). Sterling advanced against both the single currency and the dollar last week, closing at 83p and just north of $1.30 respectively, with its gains accelerating after the resignation of the now ex-Chancellor, Sajid Javid, with the market taking the view that this might mean a greater loosening of the fiscal purse-strings than would otherwise have been the case

Notwithstanding on-going concerns about the coronavirus, European and US equity markets advanced again last week and, despite a recent wobble, are ahead in February to date and on a year to date basis. Meanwhile, core bond yields were largely unchanged on the week in the case of German and US 10-year yields (at -0.38% and 1.59% respectively) and were about 5bps higher in the case of equivalent UK yields (at just over 1.60%)

The Euro area economy grew by 0.1% quarter-on-quarter in the fourth and final quarter of 2019 according to the second estimate of GDP published on Friday (having expanded by 0.3% in the third quarter), but within this both the French and Italian economies contracted (GDP fell from Q3) while the German economy stagnated (zero growth between the third and fourth quarters of the year)

Retail sales in the US rose in January but manufacturing output fell at the start of the year, while the headline rate of inflation rose to a circa 18-month high (of 2.5%). Estimates from the Atlanta Fed suggest the run-rate for GDP growth in the first quarter of the year, based on the  indicator data to hand, is around 0.6% (on a quarter-on-quarter basis), slightly ahead of the Q4 outturn

Data due this week include February PMIs (Friday) in the Euro Area, UK and US, which will be scrutinised for any coronavirus-related economic impact, while in the UK the latest (Q4 2019) labour market report (Tuesday), CPI (Wednesday) and retail sales (Thursday) are all slated for release