The single currency has swung wildly against the US dollar over the break, but starts 2022 at the same rate as early December, around $1.13. Over the same time period it has dropped by around 1.3% against sterling.
There was some relief for the eurozone this morning with some positive data releases. Germany saw retail sales for November leaping ahead of expectations. Spain’s new unemployment claims were well below expectations, falling by nearly 77,000. French inflation at 0.2% for December was half the 0.4% predicted.
Later today we’ll hear about unemployment for December in Germany, with Europe’s largest economy in the grip of Omicron. Tomorrow there is Italian inflation, where anything of 4% or over could affect EUR. Even more importantly, will Thursday’s German inflation reading exceed last month’s 5.2%? Or Friday’s euro area inflation reading exceed last month’s 4.9%?
There is no interest rate decision until 3rd February, but a picture of worsening inflation could well encourage the euro to strengthen on the promise of monetary policy tightening.
