FX market largely treading water
It was relatively uneventful in FX markets again yesterday. There wasn’t a whole lot of movement in the main currency pairs amid a mixed bag of US economic data. The euro traded within a tight range against the dollar and is at around $1.1680 this morning. Sterling has drifted lower against the US currency, to just under $1.3440, and has also given up some ground against the euro, trading at around £0.8685. There may be more ‘treading of water’ today ahead of the December jobs report in the US tomorrow.
Government bond yields in the main markets edged lower yesterday. The long end of curves outperformed, with yields around 3-6bps lower, probably benefiting from a combination of current geopolitical tensions and lower oil prices. Equity markets took a breather following their gains earlier in the week, with European and US stocks ending unchanged to slightly lower on the day. Brent crude oil prices dipped below $60 p/b for a time yesterday but are back above this level this morning.
In terms of the US economic data, the ISM index of activity in the private services sector rose strongly in December, jumping to a 2025 high (54.4), probably benefiting from the reopening of the government after the record-long shutdown in October through into November. On the other hand, private sector employment rose by a relatively modest 40k last month according to the latest ADP report, though this isn’t necessarily a good guide to tomorrow’s official jobs data, while the number of job openings fell sharply in November, falling to the lowest level in over a year.
Headline inflation in the Euro area was ‘bang on target’ at 2% in December according to the flash reading, down from 2.1% in November. Core inflation (i.e. excluding energy, food, alcohol & tobacco) was a touch lower than expected at 2.3%, down from 2.4%, with core goods inflation and core services inflation both down a little last month (to 0.4% and 3.4% respectively versus 0.5% and 3.5% in November).
Looking to the day ahead, there is quite a bit of Euro area date due including the Economic Sentiment Indicator (December), unemployment (November), producer prices (November), and the ECB’s latest survey of consumers’ inflation expectations. Data scheduled in the US include the regular weekly jobless claims and unit labour costs for Q3 2025.