November 29, 2024

“The euro has been surprisingly resilient over the past couple of days, helped by a partial unwind of the dollar’s post-election strength. Eurozone CPI inflation is the main event today, and after that it is all eyes on US non-farms next week.”

Sam Cornford – Head of Trading

USD

The dollar largely moved sideways in a Thanksgiving-thinned trade yesterday and has weakened a touch this morning as the corrective mood persists in markets. There is no data from the US today, and the dollar is struggling to extract any strength from dovish developments in the eurozone. The one pair where there has been a lot of activity is USD/JPY, which dropped below 150 this morning for the first time since mid-October on building bets on a December cut after Tokyo CPI came in higher than expected. The yen is now the only currency to have strengthened against the dollar this month. There are plenty of catalysts to kick off December next week, with markets looking to the ISM PMIs, a JOLTS report, and, most importantly, a key non-farm payrolls print.

GBP

Sterling has broken above 1.27 against the dollar for the first time since early last week. There is some mortgage and consumer lending data out this morning alongside a speech from BoE Governor Bailey on financial stability.  Neither will be a gamechanger for the pound, however – expect it to follow the broad G10 today. GBP/EUR is likely to see some activity on the back of eurozone CPI this morning.

EUR

Despite multiple headwinds, the euro is holding on to the gains it made on Wednesday after the ECB’s Schnabel wiped out bets on a 50bp rate cut next month. As much as the doves and some downside inflation surprises in Germany and France have tried, the market is not being convinced that a jumbo cut is still on the table. Portugal’s Centeno announced that inflation is ‘no longer a problem’ for the ECB, while France’s Villeroy said that he sees significant room to remove policy restriction further. Eurozone CPI this morning is a critical input, but a big surprise is likely needed by this point to take rates lower at the short end. The survey estimate was 2.3%, although the risks are to the downside now that we have had some softer figures in France and Germany. In France, it still isn’t clear whether Barnier’s government can get a budget through next week, with Le Pen upping her demands over the past few days.

Markets

Shares in Europe and Asia rose in a quiet session, with the Euro Stoxx 50 rallying 0.5% and Chinese large-cap equities rising 2%. US futures similarly rose half a percent in Asia and the cash market is open again today after the Thanksgiving break.

Main Economic Events (All Times CET)

8:00am: Sweden GDP
8:45am: French CPI
10:30am: UK Mortgage Approvals
11:00am: Eurozone CPI
2:30pm: Canadian CPI

To learn more about Ballinger Group, please visit our website or our LinkedIn page.