Eurozone given boost after growth revised sharply higher

Enrique Díaz-Álvarez09/Sep/2015Currency Updates


The UK currency continued to rebound yesterday, rallying strongly during Asian trading before appreciating by 0.2% against the US Dollar during the London session.

Yesterday’s rally in the Pound came despite another gloomy report for the UK. According to the British Retail Consortium, retail spending stagnated in August. Spending barely rose on a year earlier, increasing by just 0.1% on an annualised basis, the smallest increase since April and well down on the 2.2% expansion registered in July. This disappointing reading was no doubt driven by mixed weather in the UK last month, coupled with the later-than-usual date of the August bank holiday, with sales of furniture particularly hard hit. While painting a weaker picture of the UK retail sales sector than recent official figures, the data was mostly in line with last week’s study from BDO, which showed the biggest drop in retail sales since the financial crisis.

A string of data in the UK today will likely cause volatility in the Pound. Industrial and manufacturing production from ONS this morning will be followed by NIESR’s GDP growth estimate for the three months to August. This has scope to be revised downwards given the recent poor performances in the flash PMI’s.


An impressive upward revision in second quarter growth figures and positive Germany data caused the Euro to stabilise versus the Dollar yesterday afternoon, finishing the day just 0.1% lower.

The Eurozone economy was given a much needed boost yesterday, after Mario Draghi’s gloomier than expected assessment of its economy last week. Economic expansion in the Euro-area was unexpectedly revised significantly upwards, from 1.2% on an annualised basis, to 1.5%, while quarter-on-quarter growth was hiked from 0.3% to 0.4% according to Eurostat. This increase was supported by an upward revision in Italian growth, while France remains a concern, continuing to register no growth during the quarter. The much needed dose of good news was driven primarily by higher levels of household spending.

Earlier, Germany’s trade balance soared to a record high in July. Seasonally adjusted exports rose by 2.4% to 103.4 billion Euros, while imports increased slightly less by 2.2% to 80.6 billion Euros. This subsequently widened the trade balance to its highest surplus since records began in 1991.

With very little data of note out in the Eurozone today, traders will likely switch their attention to announcements elsewhere.


A sharp decline in the US Dollar during Asian trading was quickly reversed yesterday morning. The currency stabilised as the London trading session progressed to finish 0.1% higher against its major peers.

The main data point of the day in the US came from the Federal Reserve, with the release of its labour market conditions index. The index, which combines nineteen different labour market indicators, rose by 2.1 points in August, the largest monthly improvement in the survey since January. Such a reading provides further evidence of a tightening in the US labour market, and is in line with our view that labour market conditions are currently sufficient enough to warrant an interest rate hike in the US later in the month.

Meanwhile, business optimism among small businesses in the US economy increased moderately last month according to the National Federation of Independent Businesses. The monthly index rose 0.5 points to 95.9, after an increase in job creation and inventory investment.

Similarly to the Euro-area, there is a lack of major economic releases out of the US economy today. The JOLTS job openings and mortgage applications from MBA may cause moderate volatility.

Rest of the world

A rally in oil prices yesterday provided a boost for oil driven currencies; namely the South African Ran, Russian Rouble and Australian Dollar, which all gained by more than one percent against the US Dollar.

Meanwhile, there were further signs of economic weakness in China after data showed a sharp decline in the value of both imports and exports, causing the trade surplus to jump nearly forty percent on a month previous.


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.