- After the December ECB meeting and the UK general election, the EUR[1]-crosses are giving up their gains.
- Rates markets still don’t see any action from the ECB in the first half of 2020;no rate moves are priced-in through October 2020.
- Per the IG Client Sentiment Index[2], EUR/JPY[3] and EUR/USD[4] may trade sideways in the early part of next week.
Euro Struggling in December
On balance, the Euro has had a weak December. Thanks to dramatic shifts in key macro themes – the ‘race to the bottom’ among central banks, the US-China trade war, and Brexit vis-à-vis the UK general election – there has been a rush by traders into currencies that have struggled this year under the weight of geopolitical tensions.
Thus far in December, the Euro has only gained ground against three currencies: the Canadian Dollar[5] (EUR/CAD[6] 0.23% month-to-date); the Japanese Yen[7] (EUR/JPY 0.76%); and the US Dollar[8] (EUR/USD[9] 0.93%). Elsewhere, the losses have been steep: the British Pound[10] (EUR/GBP[11] -2.2%) and the New Zealand Dollar[12] (EUR/NZD[13] -1.6%) have been the clear winners.
Eurozone Economic Data Starting to Improve
The Euro’s struggles in December have been removed from improvement in domestic Eurozone economic conditions. The forex economic calendar has been more favorable in recent days around the December ECB meeting. Overall, Eurozone economic data has improved, at least when trying to measure releases relative to expectations. The Citi Economic Surprise Index for the Eurozone, a gauge of economic data momentum, currently sits at 9 today relative to -11.1 one-month ago on November 15 and -36.5 on September 13.
Eurozone
