North American Summary and Highlights 8 January
Overview - The USD was generally strong supported by Trump comments but the GBP was particularly weak.
North American session
The North American started with a sharp slide in the GBP. GBP/USD sliding to 1.2325 from 1.2450 as gilt yields surged reviving memories of the 2022 crisis. EUR/GBP advanced to .8350 from .8290 but EUR/USD slipped to a low of 1.0273 before correcting. The USD also saw support from Trump suggesting he would declare an economic emergency to justify tariffs. This saw USD/JPY advance to a high of 158.55 and USD/CAD touching above 1.44.
Dovish comments from Fed’s Waller, downplaying the inflationary risks from tariffs while expecting further easing in 2025, followed by a slightly below consensus 122k rise in December’s ADP employment estimate outweighed a very low initial claims total of 201k. The USD edged off its highs, EUR/USD recovering above 1.03 and GBP/USD above 1.2350. FOMC minutes provided no major surprises, but in signalling a more careful approach to easing gave the USD some support. USD/JPY remained close to 158.50.
European morning session
The USD was generally firmer through the European morning, with EUR/USD losing around 35 pips to 1.0315, and USD/JPY gaining 25 pips to 158.30. The EUR suffered from weaker German and Eurozone data. German retail sales and factory orders data for November both came in weaker than expected in m/m terms, although revisions mean that retail sales were stronger in y/y terms than the consensus. Even the big 5.4% decline in factory orders wasn’t clearly weak in trend terms after strength in recent months, but it was well below expectations and helped to drag the EUR lower. The European Commission Eurozone survey of business and consumer confidence was also weak, with economic sentiment falling to its lowest since the pandemic. The USD’s strength also owed something to Tuesday’s strong US JOLTS and ISM services data.
The SEK was the weakest currency on the morning as Swedish CPI came in weaker than expected in December, rising just 0.8% y/y and 1.5% on a core basis, increasing the chance of a 50bp Riksbank rate cut in January. EUR/SEK gained around 3 figures to 11.53 before dropping back.