Euro has the best of a quiet day

Tom Tong13/Mar/2014Currency Updates

GBP

The euro continues to be the surprise package of the currency markets, and yesterday the pound again lost ground on its nearest rival, falling back 0.4% over the day. The pound saw gains against the dollar around midday but these were lost in the afternoon session.

The lack of data from the UK yesterday meant the pound had nothing solid to fall back on, hence the poor performance against the euro. Although it made those early dollar gains, the market recovered and kept sterling subdued.

It seems that without constant reminders of the UK’s strong economic recovery, the market is always looking away from the pound. The majority of the forecasts coming in to 2014 were calling for weakness against the dollar at least, but this is being consistently checked by positive UK data. It seems the longer term positions of the major 3 currencies are becoming more difficult to foresee.

Once again there is nothing from the UK today and we must look forward to tomorrow’s trade balance data for any pound led movements.

EUR

The euro took points off both the dollar and the pound yesterday, punching back up to those record highs seen against the dollar last week, and reaching fresh highs for the year against the pound.

The strong performance was largely due to yet more positive EU data, this time in the form of industrial production. The sector expanded 2.1% YoY in Jan, up 0.2% on expectations and 0.9% on the previous reading. It did see a slight contraction MoM, at -0.2% but, as always, the longer term reading is more closely scrutinized as it gives a clearer indication of trends. Other data released yesterday was minor and not particularly surprising, although Spain posted an encouraging positive inflation reading for Feb after seeing the dreaded deflation in January.

All eyes are on the ECB today as Mario Draghi delivers the monthly report into the current economic situation. Items on the agenda will likely be the perennial problems of deflation and growth in the peripheries.

It will also be interesting to see if Greece has made any progress on unemployment, which was measured last at a staggering 27%. We also have minor inflation data from France and Italy.

USD

Yesterday the dollar lost ground again against the euro, falling off another half a cent. It fell off against the pound before lunch but quickly regained any shortfalls, ending the session back on par.

The explosion in central New York yesterday had markets jittery for a short period of time, before investigators quickly established the accidental nature of the incident and markets returned to normal. The excitement created by the accident was probably in part due to a lack of distractions elsewhere, with a distinct lack of data from the US.

We did see mortgage applications for early March, down by 2.1% for the week. Oil stocks however grew a massive 4M to 6.18M at the beginning of the month.

Some interest will be generated today by initial jobless claims, which are expected to be very positive coming off the back of last month’s strong Non-Farm Payroll figures. We have retail sales for Feb, which will hopefully bounce back from January’s contraction. We also have business inventories, import and export price indices and the Fed’s monthly budget statement. Today should provide more excitement than the rest of the week.

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Written by Tom Tong

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