EUR / USD
The German trade surplus increased to EUR18.2bn for October from EUR17.6bn previously, although export growth was slightly below expectations at 0.8%.
There was further uncertainty over the EU budget with attempts to resolve the dispute with Hungary and Poland ahead of Thursday’s EU Summit.
The Euro was unable to make further headway in early Europe and gradually lost ground with a retreat to below 1.2100 as the US dollar also pared losses against major currencies. There was some evidence of year-end demand for the US currency, although dollar sentiment overall remained negative.
US JOLTS job-openings increased to 6.65mn for October from 6.49mn previously and slightly above consensus forecasts.
The dollar gained renewed support later in the European session, especially as equities started to lose ground, and commodity currencies also surrendered gains. In this environment, the Euro retreated to around 1.2060, although ranges were still relatively narrow.
The ECB will announce its latest policy decision on Thursday with expectations that the bank will expand its bond purchases under the PEPP programme and also offer further cheap loans to the banking sector. Rhetoric on the Euro from President Lagarde will be watched closely, especially with the currency trading above the 1.2000 level against the dollar. Germany reported a record number of new coronavirus cases which maintained reservations over the near-term outlook. The dollar was unable to secure further support on Thursday as commodity currencies secured renewed gains and the Euro traded just below 1.2100 in early Europe.
Chinese new loans increased sharply by CNY1,430bn for November following a CNY690bn increase the previous month and slightly above consensus forecasts. M2 money supply growth strengthened to 10.7% from 10.5% previously which curbed unease over the risks of a Chinese slowdown.
The Japanese yen gained some support from weaker risk conditions and the Euro retreated to below the 126.0 level. As the dollar secured wider support it strengthened to the 104.40 area before fading again as US equities moved lower with underlying yen selling still subdued.
There were further concerns over near-term US coronavirus developments with news cases of over 217,000 reported for Wednesday and the daily death toll also increased sharply which maintained unease over the short-term trends. There was no progress towards a US fiscal stimulus package during the day with developments watched closely. The yuan faded on Thursday which provided an element of dollar support in choppy trading with the US currency edging higher to the 104.40 area.
Sterling made significant gains ahead of Wednesday’s New York open with some optimism that the talks between UK Prime Minister Johnson and EU Commission President von der Leyen would potentially result in a breakthrough and push negotiators towards a deal within the next few days.
Sterling peaked near 1.3480 against the dollar where there was solid selling interest while the Euro dipped below 0.9000.
UK currency gains gradually faded as caution prevailed ahead of the meeting and political rhetoric was generally negative ahead of the meeting. Sterling was also unsettled by warnings that London could be placed in the highest coronavirus tier due to an increase in cases.
The UK currency was unable to hold above 1.3400 and the Euro also found support below 0.9000 with weaker risk conditions also limiting currency support.
After prolonged discussions over dinner, reports suggested that the meeting between Johnson and von der Leyen had not made significant progress and that there were still large differences in positions. Discussions would continue over the next few days with a firm decision due by Sunday. Sterling dipped lower early in the Asian session, but attempted to stabilise on Thursday. UK GDP increased 0.4% for October, in line with consensus forecasts with expectations of a fourth-quarter contraction, although production data stronger than expected. The UK currency traded just below 1.3350 against the dollar while the Euro strengthened to 0.9060.
The Swiss franc maintained a strong tone on Wednesday with the absence of selling interest still a key element even when risk appetite held firm. The Euro retreated to near 1.0750 while the dollar secured only a marginal recovery and stalled around 0.8900 with the franc strengthening as Wall Street indices weakened.
There were further reports that Switzerland would meet the criteria to be labelled as a currency manipulator which increased speculation that the National Bank could be discouraged from intervention. Failure to secure any Brexit progress also underpinned the Swiss currency and the franc maintained a firm tone on Thursday.