North American Summary and Highlights 25 Jan

North American session

The USD gained ground through the North American session, with EUR weakness the main theme on the back of what was perceived as a less hawkish press conference after the ECB meeting from president Lagarde. The ECB left rates unchanged as expected, but acknowledged the decline in inflation had continued, and admitted risks to growth to the downside. EUR/USD fell by more than half a figure to 1.0830. EUR/GBP fell from .8560 to .8530 and EUR/CHF returned to .94 after earlier rising to .9420.

The USD also initially fell against the JPY after the US GDP data, dropping to 147.20, as US yields fell even though the Q4 GDP data was on the strong side of expectations, at 3.3% annualised. The decline in US yields and the USD may have related to the lower than expected GDP price index of 1.5%, even though the core PCE deflator was steady as expected at 2.0%. An upward correction in initial claims 214k may also have played a pat though this did no more than offset last week’s very low 189k outcome. However, USD/JPY recovered to opening levels by the end of the session. Despite the USD being stronger overall, USD/CAD was weaker, falling below 1.35.

European morning session

The USD was slightly weaker across the board through the European morning session. EUR/USD gained around 15 pips to 1.0895, and other USD pairs saw similar moves. The scandis were both a little stronger against the EUR, gaining a couple of figures each, while EUR/CHF rose around 10 pips, but there was little other cross movement. 

The main news of the morning was the German IFO survey, which came in weaker than expected. The business climate index and the current conditions index both hit their lowest since the pandemic, and excluding the pandemic the lowest since the GFC. However, there was little FX impact, with the EUR remaining resilient. Earlier, the French INSEE survey was unchanged on the month in January. The UK CBI distributive trades survey hit its lowest since the pandemic, but had no impact, as this survey is not much watched nowadays.