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As Risk Appetite Returns, Economic Data and Brexit Put the EUR and GBP in Focus

Bob Mason

Earlier in the Day:

It was a relatively busy day on the Asian economic calendar in the earlier hours of this morning.

Key stats included November trade data out of Australia and December inflation figures out of China.

From the UK, December’s BRC Retail Sales Monitor was also in focus in the early part of the day.

Outside of the stats, geopolitics remained in focus. The Asian markets responded to Trump’s speech late in the day that eased concerns of further action against Iran.

For Aussie Dollar

Australia’s trade surplus widened from a revised A$4.075bn to A$5.800bn in November. Economists had forecast a trade surplus of A$4.150bn.

According to the ABS,

  • Goods and services credits rose by A$706m (2%) to A$40,893m.
    • Non-rural goods rose A$718m (3%) and rural goods by A$9m.
    • Non-monetary gold fell by A$120m (6%).
    • The net exports of goods under merchanting held steady at A$5m, while services credits rose by A$99m (1%).
  • Goods and services imports fell A$1,020m (3%) to A$35,093m.
    • Imports of consumption goods fell A$610m (7%).
    • Capital goods imports fell A$259m (4%), with intermediate and other merchandise goods imports falling A$102m (1%).
    • Non-monetary gold imports fell A$11m (2%), with services debits down A$58m (1%).

The Aussie Dollar moved from $0.68728 to $0.68733 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.19% to $0.6873.

Out of China

The annual rate of inflation held steady at 4.5% in December. Economists had forecast an annual rate of inflation of 4.7%.

Month-on-month, consumer prices stalled in December, following a 0.4% rise in November. Economists had forecasted a 0.3% rise.

Wholesale inflation also disappointed, with the Producer Price Index falling by 0.5% in December. In November, the Producer Price Index had fallen by 1.4%. Economists had forecasted a 0.4% decline.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.10% to ¥109.23 against the greenback. The Kiwi Dollar was up by 0.01% to $0.6648.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Key stats include November industrial production and trade data out of Germany in the early part of the day.

Later in the European session, the Eurozone’s November unemployment rate will also be in focus.

While we would expect the stats out of Germany to have a material influence, any downside will likely be limited.

Renewed optimism ahead of next week’s phase 1 trade agreement signing between the U.S and China will likely offset any negative numbers.

On the geopolitical front, Iran and Brexit will remain in focus. From the UK Parliament, it’s the 3rd day of debate over Johnson’s Withdrawal Bill. A parliamentary vote is expected late in the day, which will ensure that Britain’ transition period ends on 31st December, with no extension to the transition period permissible…

At the time of writing, the EUR was up by 0.07% to $1.1113.

For the Pound

It’s a quiet day ahead on the economic calendar. There are no material stats due out following this morning’s BRC Retail Sales Monitor numbers for December.

We expect focus through the European session to be on the UK Parliamentary debate on Boris Johnson’s Withdrawal Bill.

Expect the Pound to respond to the outcome. On Wednesday, the European Commission President had met with the British PM and once again voiced concerns over the timeline to wrap up a trade agreement…

Earlier in the day, the BRC Retail Sales Monitor rose by 1.7% in December (year-on-year), partially reversing a 4.9% slide in November.

At the time of writing, the Pound was up by 0.08% to $1.3107.

Across the Pond

It’s also a relatively quiet day on the data front. Key stats are limited to the weekly jobless claims figures.

Barring particularly dire numbers, we expect the numbers to have a muted impact on the U.S Dollar.

The focus on the day will remain on Washington and the Middle East. Both the Greenback and the global financial markets are yet to be fully free of the threat of more from Iran…

For now, however, it’s risk-on, which is Dollar negative.

The Dollar Spot Index was down by 0.02% to 97.280 at the time of writing.

For the Loonie

It’s a relatively quiet day on the economic calendar, with December housing starts and November building permits due out.

We would expect the numbers to have a muted impact on the Loonie, barring particularly dire numbers.

With tensions in the Middle East abating, for now, focus returned to the phase 1 trade agreement that provided support to crude oil prices early in the day.

Oil prices had been under the hammer on Wednesday as tensions eased, with WTI sliding by 5.74%. At the time of writing, WTI was up by 1.02%.

The Loonie was up by 0.05% to C$1.3033 against the U.S Dollar, at the time of writing.

This article was originally posted on FX Empire

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