North American Summary and Highlights 12 Dec
Overview
ZEW data supported the EUR and CPI supported the USD, while oil price falls hit the commodity currencies.
North American session
The USD gained ground through the North American session. EUR/USD only fell around 20 pips to 1.0790 and GBP/USD fell around 20 pips to 1.2560, but USD/JPY gained 45 pips to 145.65,. The AUD, CAD and NOK were the weakest currencies, as the oil price fell over $3 on the day. AUD/USD lost 40 pips to 0.6550, USD/CAD rose half a figure to trade above 1.36, and EUR/NOK rose 8 figures to 11.84.
The US CPI data was the trigger for the general USD gains, with the headline m/m gain of 0.1% above consensus, although the core gains was in line with expectations. Weakness in the oil price was ascribed to concerns about weak demand.
European morning session
The USD was generally weaker through the European morning. EUR/USD gained 35 pips from 1.0770 to 1.0805, helped by a stronger than expected ZEW survey, and USD/JPY initially rose but fell back from 145.60 to the opening level of 145.25. GBP/USD was also net little changed on the morning at 1.2580, but fell back initially on weaker than expected UK labour market data. GBP/USD hit a low of 1.2543 before bouncing, and EUR/GBP traded up to 0.8590 from an open of 0.8560. USD/CAD bucked the weaker USD trend by trading up around 15 pips to 1.3570. EUR/CHF moved higher from 0.9440 to 0.9470.
The UK labour market data was generally on the weak side. The official average earnings data showed a slowing to 7.3% y/y from 7.8% in headline earnings growth in the 3 months to October, while including bonuses the decline was even larger, to 7.2% from 8.0%. The more up to date (and possibly more reliable) HMRC data showed a decline in the y/y growth rate in earnings of payrolled employees to 5.3% in November. Employment data was also soft, with another rise in the claimant count in November, and HMRC payrolled employment data showed a small decline of 13k on the month.
The German ZEW sentiment index was stronger than expected at 12.8, its highest since March, but the current conditions index remained close to the lows.