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The mood in markets turned risk averse yesterday as news broke of tanker tensions in the Atlantic.
Wednesday was a day of whiplash across currency markets. Some high-profile data points from across the Atlantic suggested progress for the US dollar, but then again, there was the small matter of the seizure of a Venezuelan oil tanker sailing those same seas under the Russian flag.
President Trump’s approach to sanctions-flouting vessels risked deepening the crisis with Russia. Leaders in Moscow decried the scene as piracy. For the most part, major currency pairings remained stable, although the pound did lose less than half a cent to both the euro and the US dollar across the day.
Even the data showed some dislocation. On the one hand, Wednesday’s schedule recorded a strong performance from the American services sector. On the other, the number of job openings fell to a 14-month low in November.
Europe’s period of disinflation continued as the headline inflation rate sank to 2% in November. After a big fall in German inflation yesterday, Italy reported a modest uptick from 1.1% to 1.2%, still well below the European Central Bank’s target rate.
UK house prices plunged by 0.6% in December compared to November, well below expectations of a modest rise. That data comes courtesy of Halifax, whose study now has the average home price increasing by just 0.3% over the past year, the lowest annual rate in over two years.
Real wages in Japan fell for the eleventh consecutive month in November. Total cash earnings are now at their lowest yearly rate since December 2021, leading to some losses for the Japanese yen against the pound and the US dollar overnight.
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GBP: Meeting resistance
Sterling’s strong start to the year finally met some resistance against the US dollar and the euro. Investors often set technical floors and ceilings where they push back on a currency’s movements. That happened yesterday as the pound reached 1.155 and 1.35 against the euro and the US dollar respectively.
GBP/USD: the past year
EUR: Hike chatter quelled for now
The euro was watching the results from this week’s heavy dose of inflation data. Most of the reads (and certainly the most impactful ones) pointed to falling price pressures across the bloc, reducing the chance of an interest rate hike come February.
GBP/EUR: the past year
USD: Cooling labour, booming services
American economic data sent mixed messages yesterday. The private sector added fewer jobs than expected in November, as openings declined across all regions. The US dollar would post a strong day despite that, with strong services output and a risk-off tone boosting demand.
EUR/USD: the past year
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