EURO RECOVERY HANGS IN THE BALANCE
This morning, the Euro opens marginally weaker versus its most traded counterparts. Given the recent optimism in the Eurozone, particularly when considering fundamental economic improvements, those backing the bloc currency were disappointed to see that German retails sales came in showing a monthly contraction of 0.4% in August. This in turn brings year-on-year expansion to an annual pace of 2.5% versus a consensus of 3.1%.
We have plenty to look to today when trying to gather clues on the pace of the Eurozone recovery. The highlight is likely to be Core Inflation in the bloc with the forecast estimated at 0.9% which, if attained, will match the result of last month and will indicate signs of much needed stability.
Eurozone unemployment is, again, another key release to be considered. The figure is currently at 10.9% and depending on the result, it is possible that this could add to the current safe haven status the common currency has been labelled with. Many feel it is in Draghi’s interest to weaken the Euro. However, economic performance is providing him with some difficulties.
Sterling carries on feeling the pinch and was the worst performing currency over the course of yesterday versus sixteen of the most traded global currencies. The data out from the UK has had a positive tone, with last month’s Mortgage Approval above expectations and a better than anticipated CBI Reported Sales figures. Today, the UK has data out concerning Gross Domestic Product, Current Account and Business Investment. The Pound lost over 3.0% from earlier this month versus both Euro and the US Dollar.
The US Dollar has continued to benefit from investors based on interest rate expectations, as the view from market participants is that the US Federal Reserve may begin contraction of its monetary policy in in the final month of the year. Today’s data due out stateside is ADP Employment Change, Mortgage Applications and Chicago PMI later this afternoon. The main event for the US Dollar is due out on Friday afternoon in the form of US Non-Farm Payrolls job creation figures. Another showing of 200,000+ should intensify market participants’ confidence that a US rate hike is due.