Euro Up Against the Dollar and Other European Currencies

February 4, 2022

The euro climbed overnight by half a percent against the dollar, which otherwise rose 0.2% against the Swiss franc and sterling, 0.3% versus the loonie, 0.4% relative to the kiwi, and 0.5% vis-a-vis the Aussie dollar.

Equity markets remain very volatile ahead of today’s report of January U.S. labor market statistics. The ADP estimate of private U.S. employment released two days ago saw an unexpected drop and a big move at that. Analysts nonetheless anticipate a rise in overall non-farm payroll jobs. In futures trading, the DOW and S&P 500 are down slightly, while the Nasdaq, which had been clobbered yesterday, has bounced back 0.5%.

Equity markets in Europe have today fallen over 1.0% in Germany, France, Italy and Spain but show scant net change in the U.K.. In the Pacific Rim, a reopened Hong Kong stock exchange rose 3.2% while markets in China and Taiwan remained closed. Japan’s Nikkei rebounded 0.7%, and Aussie share prices rose 0.6%.

Middle East geopolitical tensions and a supply/demand imbalance lifted the price of WTI oil by 2.0% overnight and above $92/barrel for the first time in eight years. The price of gold firmed 0.4%.

Ten-year sovereign debt yields climbed 3 basis points in Germany and 2 bps in Japan but dipped a basis point in both the United States and Great Britain.

Retail sales in the euro area were hurt by Omicron and sank by a greater-than-expected 3.0% in December. That was the first monthly drop since July and left sales volume just 2.0% above its year-earlier level. Quarterly retail sales growth in 4Q was only a third as strong as in 3Q, but sales in full-2021 managed to rise by 5.0%.

German industrial orders jumped 3.6% in November and a further 2.8% in December, thanks to a 11.7% upsurge in domestic demand that easily offset a 3% drop in export orders. Analysts had expected only a marginal uptick in the latter month.

French industrial production fell 0.2% on month and 0.5% on year in December, proving weaker than analysts were predicting. French retail sales also dropped 0.2% on month, and their 1.1% 12-month rate of increase was the smallest in 13 months.

South Korean consumer prices rose 0.6% on month in January, which was the most in a year and resulted in a 12-month inflation rate that was just 0.2 percentage points less than the recent 10-year peak in November.

CPI inflation in Thailand rose a full percentage point to 3.2% last month, but Filipino CPI inflation dipped to a 15-month low of 3.0% after having averaged 3.9% in all of 2021.

Construction activity in Europe accelerated last month. The British construction purchasing managers survey index rose 2.0 points to 56.3, highest since a high of 58.7 last July. Euroland’s construction PMI of 56.6 in January after 52.9 in December was the best reading in four years and included a record high of 68.2 in Italy, a 23-month high of 54.4 in Germany, and  a 19-month of 52.0 in France.

Today’s well-bid euro was aided by ECB President Lagarde’s press conference yesterday. While the bank’s initial statement had sprung no surprises, Lagarde stressed the fluidity of the bank’s forward guidance, suggesting that interest rates may well be lifted this year depending on how growth and inflation evolve.

The Reserve Bank of Australia‘s quarterly Monetary Policy Statement likewise concedes that “if realized, the staff forecasts imply that RBA policy goals would be achieved sooner than envisaged previously,” but advocates patience and further extensive monitoring of economic trends and especially the labor market before considering an interest rate hike. The statement warns of significant uncertainties associated with the baseline inflation outlook.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: , , ,


Comments are closed.