The euro was on the rise during today’s European trading relative to major other currencies as preliminary November eurozone PMI figures surprised to the upside. The greenback was on a negative footing after markets interpreted the Fed minutes from its latest meeting as being on the dovish side, while the Canadian dollar lost ground after retail sales out of the country came in below analysts’ projections.
At 1525 GMT, the dollar’s index against a basket of currencies was 0.1% lower at 93.15, touching 93.07 at its lowest, a level last experienced on October 12. Yesterday it lost 0.8% to post its worst daily performance in months as investors lowered their expectations for the number of interest rate hikes to be delivered next year after the Fed minutes of the Oct.31-Nov.1 meeting showed some FOMC members worrying about persistently low inflation, with the inflation path determining whether they will back future rate increases by the US central bank.
Dollar/yen was little changed at 111.26. Yesterday, the pair retreated by 1.1%, while it touched a two-month low of 111.05 during today’s Asian trading. Trading activity is thinner today with US markets closed for Thanksgiving and Japanese markets also closed for a public holiday.
Eurozone November flash PMI data for the manufacturing and services industries, as well as the composite measure that blends the two sectors, all came in above expectations, pointing to broad-based growth in the euro area. Manufacturing PMI stood at 60.0 – the second-best reading in the index’s history – versus projections of 58.3 and October’s 58.5. The number for the services sector was at 56.2, with expectations and October’s print at 55.1 and 55.0 respectively. Composite PMI came in at 57.5 – its highest since April 2011 – with expectations and last month’s figure both standing at 56.0. All figures were comfortably above the 50-thershold that separates expansion from contraction.
The respective figures for Germany and France, eurozone’s two largest economies, were released earlier in the day and broadly came in above analysts’ forecasts as well, painting a positive picture ahead.
Euro/dollar, which was already on a positive footing on the back of dollar weakness, continued gaining after the release of the figures. The pair last traded 0.2% up on the day at 1.1844, little below an eight-day high tracked earlier in the day as well as not far below November 15’s six-week high of 1.1860. Should it finish higher, then this would mark the third straight day of advancing for the pair.
Before the release of PMI estimates, Germany also saw the release of third quarter GDP figures. Those showed the economy expanding by 0.8% q/q, in line with projections, and by 2.3% y/y versus forecasts of 2.6%. Euro/dollar didn’t react much within the first minutes of the release.
ECB minutes pertaining to the central bank’s latest meeting showed policymaker’s broad agreement on extending the bank’s asset purchase program at half the current pace of 60 billion euros per month (starting in January 2018 up to September of the same year), though there were differing opinions on maintaining the program’s open-ended nature as arguments were put forward for the need to have "a clear end date" for the scheme. Some dissenters even supported the view that the central bank should stop linking its asset purchases to the path of inflation and instead make reference to its overall monetary policy stance. Euro/dollar experienced volatility upon the release of the minutes, rising to 1.1855 on the upside – it’s highest for the day – with the pair more or less settling to where it traded before the release a few minutes later.
The second release of third quarter UK GDP data showed the economy expanding by 0.4% q/q as expected and 1.5% y/y, again in line with forecasts. The data showed increased household spending but a slower pace of business investment relative to the preceding quarter, with the latter being taken as a sign of cautiousness on the back of Brexit uncertainty. Sterling was last down versus both the dollar and the euro though it managed to maintain most of yesterday’s gains relative to the former. Specifically, pound/dollar was 0.2% down at 1.3305 after previously rising to 1.3336, its highest since October 2. Euro/pound was 0.4% up, just above the 0.89 mark.
Canadian retail sales for the month of September fell short of analysts’ expectations as they grew by 0.1% m/m, significantly below forecasts for a rise of 0.9%. Core retail sales that exclude automobiles, expanded by 0.3% m/m in September, with expectations standing at 1.0%. Overall, sales grew in five out of eleven sectors. The loonie lost ground relative to the greenback as the data went public with dollar/loonie jumping higher. The pair was last 0.2% up on the day at 1.2720, recovering from earlier losses that saw it fall to 1.2668 at one point in the day, its lowest since November 10.
Kiwi/dollar traded 0.15% up on the day at 0.6891 ahead of New Zealand trade data scheduled for release at 2145 GMT. The pair pierced the 0.69 handle earlier in the day to record an eight-day high.
In commodities, gold was not much changed at $1,291.12 per ounce. The dollar-denominated precious metal yesterday benefitted from the weaker greenback to finish the day higher by 0.9%. WTI was 0.45% higher at $58.28 per barrel, close to $58.31, its highest since July 2015 recorded earlier in the day. Brent crude was flat at $63.35 a barrel, trading relatively close a recently recorded more than two-year high of $64.65.
