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European currencies performed well in yesterday's session
Yesterday was a good day for major European currencies, with both the pound and the euro making ground against the US dollar.
GBP/USD and EUR/USD each climbed by a third of a per cent, while GBP/EUR ended the session unchanged after the euro shed its earlier gains.
There were also advances for the Polish zloty and the Japanese yen against the US dollar; keep an eye out for an in-depth look at those currencies in our upcoming Quarterly Forecast.
The eurozone had a disappointing day on the macro front. Retail sales in the bloc dipped by 0.3% in November, although economic sentiment did improve slightly compared to last month.
Tomorrow will see another litmus test for the European economy with the publication of November’s unemployment rate. Markets currently predict that read to come in unchanged from last month’s 6.5%, with some downside risk that it could have nudged up to 6.6%.
Bank of England (BoE) governor Andrew Bailey is due to deliver remarks tomorrow in a speech that will be watched closely before the release of GDP figures on Friday.
The price of the Brent crude oil benchmark fell sharply yesterday on the news that Saudi Arabia will cut the official selling price of its oil in February. Brent’s price fell below $76 to the barrel yesterday, significantly below its peak of over $100 per barrel in September.
Four of the United States’ biggest banking groups – JPMorgan Chase, Bank of America, Wells Fargo and Citigroup – are expected to report disappointing earnings this week after a steep rise in nonperforming loans. As companies feel the impact of higher lending costs, nonperforming loans are expected to have risen to a combined $24.4bn in the last three months of 2023, up nearly $6bn since the end of 2022.
The EU has announced €4bn in state aid to fund investments in electric cars, solar panels and heat pumps. Swedish battery producer Northvolt will receive €920mn to build a new factory in Germany as part of the deal.
Boeing is facing more questions over its aircrafts after the mid-air breach of a 737 Max model on a Alaska Airlines flight. The company’s stock price took a beating yesterday, the latest in a long line of troubles for the US manufacturer.
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GBP: National insurance discount
Sterling had a good time of it against the US dollar yesterday, but had to fight hard to end around parity against the euro.
UK Chancellor Jeremy Hunt’s scheme to reduce national insurance from 12% to 10% came into effect this week. The treasury claims the move will save the average working family almost £1,000 per year, although there is a suspicion that the move is politically motivated as the UK heads into what is likely to be an election year.
GBP/USD: the past year
EUR: German surplus
EUR/USD was on the rise yesterday, although the euro’s gains against the pound were wiped out as the afternoon wore on.
The German balance of trade increased last month to a surplus of €20bn. The German manufacturing sector relies heavily on foreign exports, and the news will be a welcome boost for the country’s ailing economy.
USD: Christmas inflation bounce?
The US dollar lost around a third of a per cent against its European rivals in yesterday’s session.
Analysts expect Friday’s inflation figures to show both the core and the headline read to have nudged up slightly in December. With headline inflation predicted to climb to 3.2% from 3.1%, the Federal Reserve may soon have fuel to push back against the loud calls for rate cuts.
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