Euro falls as global markets await key Eurozone meeting

Enrique Díaz-Álvarez11/Feb/2015Currency Updates

GBP

Mostly encouraging economic data in the UK on Tuesday caused Sterling to climb on the Dollar by 0.1%.

Driven by falls in volatile oil and utilities output, Industrial Production in the UK slowed by 0.2% in the lead up to Christmas, according to data released yesterday. The month on month National Statistics figure disappointed, causing annualised industrial output to grow at its weakest in more than a year in December at just 0.5%. Confidence remains “fragile” among factory managers according Markit chief economist Chris Williamson. However, manufacturing output surprised on the upside, with production up by 0.1% MoM, and by 2.5% on an annualised basis. In other news, growth accelerated in the three months to January according to estimates by the National Institute of Economic and Social Research. The quarterly estimate rose from 0.5% to 0.7% as lower energy prices put more money in the pocket of British consumers.

No major data releases in the UK today. Attention will instead turn to the Bank of England’s crucial inflation report on Thursday morning.

EUR

The single currency traded within a narrow band with its peers for a second consecutive day, finishing 0.15% down on the Dollar, and 0.2% lower on Sterling.

Data released on Tuesday showed more encouraging signs that the fragile Italian economy is beginning to claw itself out of its recent slump. Industrial Production in Europe’s third largest economy edged up above expectations by 0.4% in December. Year on year output came in much stronger than expected at 0.1%, after analysts had braced for a substantial 1.3% decline. Similarly impressive was Industrial Output in France, which climbed by 1.5% in the final month of the year, much greater than the 0.4% expansion that was expected.

Today promises to be another subdued day in the Eurozone in terms of data. However, we will see the emergency Eurozone meeting in Brussels, with Finance Ministers of the Eurozone member states set to discuss the situation surrounding Greece’s debt. The outcome of the meeting could have major implications for markets and, while there have been hints there may be room for compromise, Greece and Europe are still very far apart according to German finance minister Wolfgang Schaeuble.

USD

A number of smaller releases in the US on Tuesday caused the Dollar to rise marginally on its peers by 0.25%.

Optimism among small business owners declined slightly in January. A report by the National Federation of Independent Businesses edged down to its lowest reading in three months at 97.9, significantly below the 101.3 that was forecast. Positively, however, demand for labour among small businesses increased, with firms adding a “historically high” average of 0.16 employees per firm in the three months to January. US wholesale inventories, a measure capturing the sales from the second stage of the manufacturing process, remained close to static in December, edging up by just 0.1%. This was the weakest recorded growth since June 2013, and suggests that the fourth quarter GDP reading may be revised lower. Elsewhere in the US, job openings soared above five million in November with the JOLTS survey climbing by 181,000 to 5.028 million, its highest level since January 2001.

The soon to be retired Dallas Fed President Richard Fisher will be speaking at 1pm London time today, while a handful of second-tier releases including mortgage applications at midday are likely to cause additional volatility.

Rest of the world

The Nigerian Naira fell to a record low against the US Dollar after the country postponed its election, increasing the likelihood that Africa’s worst performing currency will be devalued. The Naira depreciated by 2.2%, its greatest decline so far this year.

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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.