European Summary and Highlights 5 Jan

European morning session

The USD continued to gain ground through the European morning, edging higher across the board ahead of the US employment report, helped by generally rising yields. EUR/USD lost around 20 pips to 1.0910, while USD/JPY only gained marginally to 145.20. There were similar modest gains against other currencies.

German retail sales early in the session were much weaker than expected in November, falling 2.4% m/m, but there was little immediate impact. This data is volatile and the underlying trend remains steady, albeit clearly weak. Eurozone CPI came in slightly below expectations, with the headline rising to 2.9% y/y in December from 2.4% in November, but the core continuing to edge lower, to 3.4% from 3.6%.

Asia session

The Politico reported US officials are planning for the US to respond to a wider, protracted Middle East war. The attacking of commercial ships in the Red Sea seems to have triggered the U.S. to respond with military action that they have restrained from in the past months, in order to not heighten geopolitical tension. A U.S. military action will no doubt raise global attention and be a headwind to risk asset for more uncertainty yet it is far too soon to suggest actual action is in play now. AUD/USD treads 0.12% lower to 0.6697 as USD receive haven bids and global risk sentiment tilting sour, NZD/USD followed 0.05% lower to 0.6231 while USD/CAD rose 0.1% despite oil recovering some Thursday losses.

Apart from the Middle East, North Korea has fired hundreds of shell toward South Korea border. Even with none landed on South Korea land, it is a sensitive time and create more uncertainty. U.S. Treasury Yields are performing mixed while JGB yields slip. USD/JPY continue to rebound and approached December high at 144.95. Elsewhere, EUR/USD is down 0.08% and GBP/USD is down 0.04%.