Euro gave up its gains recorded at the beginning of the week against the US dollar, falling to the level of 1.06607 at nearly 9:15 am GMT, a decline of 0.34%.
As for the British pound, the euro still continues to record the gains extended since Monday afternoon and reaches the level of 0.87109, which is the highest during today’s session, at approximately 10:10 this morning.
Before that, the euro recorded a new record high against the Japanese yen at 161.045 at approximately 6:30 am, which is the highest since 2008.
Today we saw the German Consumer Price Index numbers for last October. Inflation growth declined to 3.8% last October compared to the same month last year. It also declined to cool completely on a monthly basis compared to last September, which was at 0.3%. While both readings were in line with analysts’ average forecasts.
As for the eurozone as a whole, we also witnessed retail sales figures for September, which declined by 2.9% on an annual basis, compared to expectations for a decline of 3.1%, but this decline is still significantly higher than the previous reading of 1.8%.
While the monthly reading also recorded a larger decline than expected, by 0.3% compared to a decline of 0.2%, this decline also was less than the previous contraction of 0.7%.
I believe that these figures indicate a further cooling of the household sector in the Eurozone due to the pressure of tightening credit conditions, despite some positive signs from the service and manufacturing business sectors, which have suggested the possibility of the region’s economy stabilizing and returning to growth and stopping the current contraction in activities.
However, this recovery may take more time to reach the households suffering from weak sentiment and is still tending to reduce spending.
As for the euro’s gains against the pound sterling, they come as part of the euro’s attempt to recover after the losses that have extended since late last week, after the Governor of the Bank of England (BoE), Andrew Bailey, spoke of ruling out the possibility of cutting the interest rate anytime soon.
While Bailey maintained the same strict tone his speech this morning in Dublin, Ireland, he also stressed the existence of upward risks to inflation, including the risks of expanding the conflict in the Middle East.
While the statements of the president of the BoE came after the speech of the Chief Economist at the European Central Bank (ECB), Philip Lane, who stressed that progress in combating inflation is not enough, despite what has been achieved so far, and cited the risks of rising energy prices, which may cause to don’t take a lot of comfort regarding the current inflation declines, which may rise again before returning to its correct path.
It seems that the speech of ECB officials may also indicate the possibility of it holding the record high interest rates for a longer period than expected during the coming year, as is the case with the BoE and the Federal Reserve.
However, the story is different for the Japanese yen. The euro’s gains against the yen today came with the continued flow of negative data from the Japanese economy. Today we witnessed a lower-than-expected reading for the Leading Index, at 108.7, compared to expectations of 108.8.
This reading came after the negative reading of household spending figures, which continued to decline for the seventh month in a row at the level of the annual reading, which recorded a decrease of 2.8%.
I believe that these negative data for this week may help the Bank of Japan stick to its ultra-loose monetary policy that will not hamper growth in the already declining economy, which seems to be the central bank’s focus more than inflation.
As for the bond markets, the decline in the yield on ten-year European government bonds continued to pressure the European currency, with a decline to 2.626% this morning, which is the lowest levels that we have not seen since mid-September.
While US Treasury bonds are still trying to widen the gap between them and their European counterpart for ten years. After the series of declines that extended a week ago, the yield gap rose to 1.938% again today.