Markets quiet in lead up to Christmas period

Enrique Díaz-Álvarez23/Dec/2014Currency Updates

GBP

Limited movement in the Pound on Monday after little data was released in the UK. Sterling ended the day 0.25% down on the Dollar.

Consumer’s confidence in their financial situation is at its highest level since 2011 according to a Lloyds Bank survey. The index released yesterday has climbed by three points since October to 154. Gas, electricity and fuel bills have continued to fall with 23% of the 2,000 people surveyed now believing they will have more disposable cash to spend in the coming months than they had previously.

There will be plenty of economic releases the UK economy on Tuesday. The most important of these will be the release of the Gross Domestic Product figures for the third quarter at 9:30am local time.

EUR

The Euro edged up by 0.1% on the Dollar on Monday, climbing from the two year low reached on Friday afternoon after strong consumer confidence data.

Germany’s import prices fell at a faster than expected rate in November. The Import Price index dropped by 2.1% on an annualised basis last month, much faster than the 1.2% fall in the previous month and greater than the 2% decline that was forecast. The drop in the overall index was caused by a sharp fall in energy prices which were down by almost 16% in November, causing import prices to fall by 0.8% on a monthly basis. By contrast, the Export Price index rose for the third consecutive month by 0.3%. Elsewhere, consumer confidence edged 0.6 points upwards in the Eurozone according to the flash estimate from the European Commission, rising to -10.9 from a revised -11.5 in November.

Data releases are in short supply in the lead up to Christmas in Europe. GDP figures for France will be announced today, although this will take place before markets open in the UK and thus the market impact is expected to be muted.

USD

A muted day in the US caused the US Dollar to trade within a narrow band, appreciating slightly by 0.2% against its major peers.

Monday was a very quiet day in the US, with the majority of this week’s activity due to take place today. Economic growth did, however, improved substantially in November according to the Chicago Fed National Activity index which rose from 0.31 to 0.73. The measure, which represents a weighted average of 85 different economic indicators, reached its highest three month average since May 2010. Elsewhere, US stock markets moved within touching distance of all-time highs as US consumers continue to benefit from low energy prices

Today will be a very busy day in the US economy in the lead up to the Christmas bank holidays with a string of tier 1 data. This will be kicked-off by the US Census Bureau with the release of Durable Goods Orders at 1:30pm GMT, followed by GDP data for the third quarter.

Rest of the world

Focus remains on Russia this week. The country’s former Finance Minister warned on Monday the country is on the brink of a “full blown economic crisis”, with a recession next year looming. Despite this the deputy Prime Minister Igor Shuvalov indicated that the government would not use currency controls, which would cause more harm than good. Notably, the Ruble has recovered well so far this week, reaching its strongest position in eleven days.

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Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.