Euro falls on major peers as crucial Greek election enters home stretch

Enrique Díaz-Álvarez13/Jan/2015Currency Updates

GBP

A very quiet start to the week as far as data releases are concerned in the UK. Sterling fell as markets opened on Monday before recovering to finish 0.1% down on the US Dollar.

The Pound approached its weakest level in eighteen months versus the Dollar ahead of the release of inflation data today. The National Statistic’s monthly inflation report this morning is widely expected to show consumer price growth slowed to below 1% in December for the first time since 2002, amid continuing oil price declines. This fall will push the economy even further away from the UK’s 2% inflation target. The falling oil prices, however, do appear to be filtering through to consumers, with a service station in Birmingham yesterday lowering prices below £1-a-litre, the first time this has been seen in the UK since 2009.

Inflation data at 9.30am will be the main focus in the world markets today, however, the Producer Price index and Retails sales, also at 9.30am, may cause some additional volatility.

EUR

Monday was a similarly subdued day for the Eurozone, with the Euro trading within a narrow band of its peers. The Euro finished trading 0.3% and 0.25% down on Sterling and greenback respectively.

The single currency continued its slide against the Dollar as expectations for the introduction of sovereign-bond purchases continue to increase. With the crucial Greek elections now only two weeks away, opinion polls remain tight. The leftist Syriza party is now just 2.6% behind the New Democracy party according to a Kapa Research poll yesterday. The percentage required for a majority ruling, however, remains some way off, with the Syriza party still more than likely to require a coalition if Monday’s polls are anything to go by.

Today should be another quiet day in Europe with only a handful of second-tier data releases. Industrial Production on Wednesday and revised inflation data on Friday look set to be the only major releases in the Eurozone this week.

USD

Greenback remained strong as markets opening this week with the US Dollar index climbing by 0.2% to just shy of the nine year high achieved last week.

The Federal Reserve’s Labor Market Conditions index climbed sharply in December as momentum in the labour market appears to be accelerating. The weighted index of 19 different labour market indicators rose to its highest level since May last year at 6.1, up on last month’s reading which was revised from 2.9 to 5.5. This further highlights the improving state of the US labour market following better than expected Nonfarm Payrolls and falling unemployment to 5.6% released last Friday.

A lack of data in the US today as attention across the pond will be focused on Wednesday’s retail sales and the announcement of December’s inflation on Friday afternoon.

Rest of the world

The price of Crude oil hit a fresh five -and-a-half year low on Monday, falling over 5% to below $47 a barrel after Goldman Sachs slashed its price forecasts for 2015. The oil dependant Naira, Ruble and Krone all fell by over one percent during the day as a result. Elsewhere, the Czech Koruna depreciated by 1.4% yesterday, marking the fourth consecutive day of declines as speculation mounted that the central bank will try to weaken the exchange rate. Unexpectedly low retail sales caused the currency to hit its weakest level since March 2009, with its biggest daily drop since late-2013 making it one of the worst performing currencies in the world yesterday.

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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.