Monex Europe : EUR The euro is trading comfortably around its new lows with minimal volatility to the dollar. New car registrations in the EU fell by 7.5% YoY compared to a 21.7% increase in December………….
Ranko Berich Responsable de Análisis de Mercados en Monex Europe
While the weakness is partly driven by weakening eurozone economic conditions, the big slump may also be a result of mean reversion driven by increased demand in December resulting from tax hikes on new cars in some European countries at the start of 2020. There are currently no indications of any recovery of yesterday’s dip, though the ZEW index release for Germany and the eurozone will be watched closely today at 10:00 GMT. Considering the pessimism around the eurozone economy, however, even better-than-expected growth data may not suffice to nudge the single currency in the bullish direction. Friday’s PMI data will be key in further shaping the current eurozone mood.
The dollar is up against most major currencies except JPY and CHF this morning, as the US returns to work after the Presidents’ Day holiday yesterday. The general risk-off vibe in markets comes after the electronics manufacturer Apple announced it would be unable to meet its Q1 revenue guidance due to the Covid-19 outbreak. The US data calendar livens up today, beginning with the empire state manufacturing index at 13:30 GMT, and the NAHB housing market index at 15:00. Federal Open Market Committee member Neel Kashkari will speak at 19:00.
Sterling began to lose ground yesterday, with its losses accelerating this morning as the US dollar gained against most currencies. Some of the recent losses in sterling may be attributable to a combative speech in Brussels by David Frost. The UK’s chief Brexit negotiator rejected the “level playing field” provisions that the EU has insisted on for a broad free trade deal to be struck, saying that if the EU insisted on these terms the UK would be willing to allow this year’s withdrawal period to lapse into “Australia-style terms”, a euphemism for no major trade agreements beyond WTO terms. Frost also said that more terms would be formally set out in the near future. With the UK essentially rejecting the EU’s opening bid for a broad free trade agreement underpinned by “level playing field” provisions and “dynamic alignment” or rules taking, the question is now if the EU is willing to settle for simply static alignment, and if an agreeable enforcement and dispute mechanism can be found. This morning at 09:30 GMT labour market data will be released for the UK.
The loonie’s modest rally over the course of yesterday was reversed overnight, as risk sentiment once again soured. Securities purchases data showed that foreigners had sold a net 9.57 billion in Canadian securities in December. Manufacturing sales data will be released today at 13:30 GMT.