EUR / USD
German industrial production declined 0.1% for October compared with expectations of a 0.6% decline and after a revised 1.1% increase for September.
Euro-Zone GDP for the third quarter of 2022 was revised slightly higher to 0.3% from the flash estimate of 0.2% with year-on-year growth of 2.3% from 2.1%, although the annual growth rate still halved from the second quarter.
The data overall helped underpin the narrative of German and Euro-Zone industrial resilience which also provided an element of currency support.
Hopes for a further easing of China’s coronavirus stance also helped underpin the Euro after the European open with gains to a peak just below 1.0550 against the dollar. The US currency recovered from lows after the US open with an element of defensive support as equities moved lower.
A fresh decline in oil prices helped cushion the Euro from further losses with support just below the 1.0500 level as overall dollar sentiment remained cautious.
Short-term attention will turn towards the latest round of US inflation data with the producer prices data due on Friday ahead of the consumer prices release next Tuesday. The latest data suggests that upward pressure on rents is easing which will have an important impact in curbing overall inflation pressures.
Narrow ranges prevailed on Thursday with the Euro trading just above 1.0500 with buying on dips despite a slightly more cautious risk tone.
JPY
After announcing some relaxation of coronavirus controls on Wednesday, China announced that there would be another press conference on Thursday with markets expecting a further move away from the zero-covid policy. Although there was an element of optimism over moves to re-open the economy, overall risk appetite remained relatively fragile during the day with equities unable to make headway.
The dollar hit highs just above 137.80 against the yen before drifting lower as unease over the economy limited scope for further dollar buying.
US non-farm productivity was revised higher to 0.8% for the third quarter of 2022 from 0.6% with the increase in unit labour costs cut to 2.4% from the first estimate of 3.1% and 3.5% for the second quarter. The slower rate of labour cost increases will offer some reassurance to the Federal Reserve.
Treasures secured limited gains following the data with the 10-year yield retreating to around 3.55% and yields declined further later in the session.
The dollar posted sharp losses with a slide to lows near 136.25 as the yen secured a significant recovery on the crosses.
US Treasuries posted further gains in Asia with the 10-year yield at 10-week lows below 3.50%, although the dollar did recover to the 137.0 level with markets waiting for further announcements from China on revisions to the coronavirus policies. The yen lost ground on the crosses with the Euro just below 144.00.
GBP
There were no major UK developments during Wednesday, although markets were monitoring latest developments surrounding labour disputes with further announcements of strikes during the Christmas and new-year period. Overall confidence in UK fundamentals remained weak, but there was a reluctance to sell the currency aggressively, especially with speculation over a covering of short positions into the year-end period.
Sterling found support near 1.2100 against the dollar and recovered to challenge resistance above 1.2200 despite generally weaker equity markets.
The Euro hit highs just below 0.8650 before a retreat to near 0.8600 with markets monitoring the relative economic performances.
Markets will be looking ahead to next week’s policy decision from the Bank of England with expectations of a further increase of 50 basis points
According to the latest RICS data 25% of surveyors reported that UK house prices were declining from 2% previously and the weakest reading since June 2020, reinforcing expectations of a sharp slowdown in the housing sector. There was still a notable reluctance to sell the UK currency with buying on dips
Sterling traded close to 1.2200 against the dollar on Thursday with the Euro edging higher to 0.8620 as Sterling continued to resist selling pressure.
CHF
The Swiss franc was unable to make significant headway on Wednesday despite weakness in equity markets with the Euro again challenging the 0.9900 area before stalling. The dollar dipped to lows at 0.9365 before a recovery to 0.9400 with further choppy and indecisive trading.
Lower US yields limited potential support for the US dollar, although the US currency edged above the 0.9400 level as the Euro traded just below the 0.9900 level.
Technical Levels
