European Summary and Highlights 08 Mar

European morning session

The EUR and USD both fell back while the JPY, AUD, CHF and GBP all gained ground through the European morning. The EUR was the weakest performer, with EUR/USD losing around 20 pips to 1.0930, while USD/JPY fell nearly a big figure, trading briefly sub-147, as Eurozone and US yields both continued to decline.

EUR weakness looks to have been related to various comments from ECB council members, including Rehn, Holzmann, Villeroy and Simkus, suggesting rate cuts were coming in the spring, with the JPY benefiting the most from the decline in yield spreads that resulted. The gains for GBP came even though UK yields moved lower with Eurozone yields.

Datawise, German industrial production data was stronger than expected in January at 1.0% m/m, but December was revised down to -2.0%, ensuring the underlying trend remained soft. Swedish GDP data was stronger than expected in January, rising 0.8%, while Eurozone employment rose 0.3% q/q and GDP was confirmed as unchanged in Q4.

Asia session

The January Household spending is showing a dismay start for the Japanese economy in 2024. Japan January Household Spending contracted by 6.3% y/y from -2.5%y/y in December, month to month contraction is also higher than estimate. Looking at the bright side, we see wage growth accelerates and is expected to accelerate further after wage negotiation, which should support the recovery in consumption. USD/JPY slips 0.14% to 147.83 as market increasingly speculate a March hike as Japanese officials white knight the poor household spending report swiftly.

U.S. Treasury Yields are lower across the curve with little impact from Biden's speech. Risk sentiment is generally positive and supported the AUD/USD to be 0.1% higher at 0.6627 while NZD/USD slipped 0.02% to 0.6173 and USD/CAD losing 0.08% on oil recovering early losses. Elsewhere, the FX market is relatively quiet waiting for U.S. data and see EUR/USD down 0.02% and GBP/USD down 0.01%.