Major European currencies came out on the front foot yesterday, as a big day for American data saw the US dollar retreat for the Thanksgiving holiday with a dent to its momentum. GBP/USD rose by almost a cent, taking it to its highest in a week. EUR/USD rose by just half a cent but that would also take the euro to its best level against the US dollar in over a week.
The euro’s positive day came on the back of a less than stellar performance in the German GfK consumer climate report. Helpfully, news from the US combined with a slightly improved geopolitical picture to allow the euro to escape more serious scrutiny.
While it may have avoided a reckoning in currency markets, it is worth dwelling for a moment on that report. The GfK survey’s score came in at its lowest (-23.3) since May, fuelled by fears of a recession, higher joblessness and falling growth forecasts. That represents a toxic cocktail for Europe’s largest economy and consumer sentiment is poor, to put it bluntly.
US data protected the euro from any serious fallout. The majority of the data from across the Atlantic came in in line with predictions but it was the lack of exceptional performances that really helped the US dollar’s European rivals. Core PCE price increases were unchanged at 0.3% in October while GDP arrived in line with forecasts at 2.8%. Durable goods orders rose by less than expected month-on-month.
For all the euro’s survival instincts, a political storm is brewing in France that could cause seismic ripples. On Wednesday, rumours built that the government could be toppled by a growing row over government debt. New prime minister Michel Barnier is facing stiff opposition to his package of spending cuts and tax rises. French government debt yields rose in the afternoon (never a good sign) and Barnier warned of “very serious turbulence” if his budget was voted down.
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