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The German trade surplus narrowed to EUR16.4bn for November from EUR18.2bn the previous month, although the monthly increase in exports was above consensus forecasts at 2.2%. Recent firm German data provided an element of Euro support, although near-term coronavirus concerns were a significant factor.

US non-farm payrolls declined 140,000 for December compared with consensus forecasts of a 70,000 gain for the month and the first decline since data April when there was a slump in employment of over 20 million. The November increase, however, was revised up to 336,000 from the 245,000 increase reported previously.

There was a sharp decline in employment of close to 500,000 for the leisure and hospitality sector as further coronavirus restrictions took effect.

The unemployment rate held at 6.7% while average earnings increased 0.8% for a 5.1% annual increase as lower-paid workers were laid off.

The data reinforced near-term reservations over the outlook, although there were also expectations that there would be further Administration fiscal stimulus measures.

The dollar initially lost ground following the data before regaining ground as underlying pressure for short covering continued. There was further dollar buying after the European close with the Euro dipping to below 1.2200 from 1.2285 highs before closing just above 1.2200.

CFTC data recorded no change in long Euro positions in the latest week, maintaining the potential for liquidation of longs on any significant shift in sentiment. The dollar rallied again on Monday as higher US yields provided net support. Commodity currencies lost ground and the Euro settled around 1.2190.


The dollar initially dipped to the 103.60 area after the US employment report, but recovered losses quickly and tested the 104.00 level at the European close. Fed Vice-Chair Clarida stated that downside economic risks have diminished due to the vaccine and the dollar traded just below 104.00. CFTC data recorded a further increase in the long yen position to the highest level since October 2016, maintaining the potential for a position squeeze and yen selling if the US currency rallies further.

Congressional Democrats announced that impeachment legislation would be brought to the House of Representatives this week unless Vice President Pence invokes the 25th Amendment to remove Trump from office. Any impeachment would not be implemented in the short term, but would prevent Trump from running again.

President-elect Biden indicated that a very substantial spending package would be announced this week with an initial boost of close to $1.0trn.

US yields continued to increase which underpinned the dollar, although there were still expectations that Conservative Democrats would limit the scope for higher spending. Overall, the dollar made headway and traded around 104.20 against the Japanese currency before stalling.


The Halifax house-price index increased 0.2% for December from 1.0% previously with the annual increase slowing to 6.0% from 7.6% with expectations that there would be a net slowdown this year. Markets tended to focus on the near-term coronavirus developments.

The UK approved the Moderna vaccine for use in the UK, although the impact was offset by fears over near-term coronavirus developments as hospital rates continued to increase. Sterling was still hampered by a lack of confidence in the near-term outlook and weak underlying fundamentals, especially with the upward pressure on the budget deficit. There was also further speculation that the Bank of England could move to introduce negative interest rates within the next few weeks.

There were also further concerns over disruption to trade following the leaving of the customs union. Companies also warned over potential tariffs on re-exporting goods to the European Union and there was unease over near-term disruption to trade flows. The UK currency did post net gains against the Euro with the single currency retreating to near 0.9000, while the UK currency again failed to hold above 1.3600. There was no significant change in Sterling positioning during the latest week and dollar moves dominated on Monday with the firmer US currency pushing the UK currency to around 1.3500 with the Euro around 0.9025.



After losing ground the previous day, the Swiss franc recovered ground on Friday with the Euro retreating to 1.0820 from 1.0870 highs amid increased reservations over the near-term euro-zone outlook. The dollar posted marginal gains only to trade just above 0.8850.

The Swiss currency was resilient despite further gains in global equity markets and a slide in precious metals as bond yields moved higher. The Euro was little changed on Monday with the dollar strengthening to around 0.8875 as the US currency secured wider gains on short-covering.




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