The Euro benefited from a light data week, seeing it gain over 2% against the Dollar in the last week, with the only data of note being Flash Eurozone GDP and employment change. The European Union’s statistics office, Eurostat, reported the collective GDP of the 20 countries sharing the Euro fell 0.1% between July and September compared to the previous quarter.
However, there was better news for the EU concerning employment, which rose by 0.3% in the same period. This contributed to an overall 1.4% year-on-year growth in employment across the region. A slump in growth is often reflected in a similarly negative trend in employment. However, the data seems to point to more resilience in the labour market than would perhaps be expected.
This week is slightly more data-heavy for the Euro, with the ECB Financial Stability Review at 9am Wednesday, French and German PMI figures on Thursday at 8:15am and 8:30am, respectively, and German IFO Business Climate at 9:00am Friday. ECB President Lagarde will also be speaking throughout the week, which may add to any potential volatility.
GBPUSD has moved back to near 2-month highs this morning following the Dollar’s negative trend from last week as markets have moved against the belief the Fed will stick to its rhetoric of ‘higher for longer’. Following this, we saw US treasury yields hit 2-month lows, leading to their steepest weekly decline since Silicon Valley Bank filed for bankruptcy in March.
The trigger for this was softer job figures and CPI. As mentioned last week, we saw US CPI reported (on a year-on-year basis) at 3.2%, which was slightly lower than forecasted, and the month-on-month figure came in flat at 0.0%. We also had an update from Walmart’s CEO, Doug McMillon, who said that he thinks we could see deflation in the next few months. The markets are currently pricing in as much as 100bps of rate cuts from the Fed next year.
Some potentially volatile data events for the Dollar this week as FOMC Meeting Minutes come out Tuesday evening at 7:00pm, followed by Unemployment claims and Revised University of Michigan Consumer Sentiment at 1:30pm and 3:00pm, respectively, on Wednesday, and finally, the US rounding off this week’s Manufacturing and Services PMI data at 2:45pm on Friday.