Insights into European and Global Markets
A Day of Uncertainty for Currency Traders
As currency traders brace themselves for another day of uncertainty, the debate over Japan’s potential intervention in yen-buying intensifies. With most of the world on holiday, excluding Japan, China, and parts of the U.S. markets, the atmosphere is tense.
Following a brief slide to a 34-year low near 152 per dollar, Japan’s three main monetary authorities convened an emergency meeting, hinting at imminent direct intervention to curb what they perceive as speculative currency trading.
The dollar has slightly retreated to a 151.30-151.50 yen range, with the potential for further movement as hedge funds and speculators consider covering their significant short yen positions.
Meanwhile, Chinese authorities are working to minimize the impact of yen weakness on the yuan, which recently hit a four-month low.
Economic Updates from Europe
In Europe, the data calendar remains subdued, with key releases including UK final fourth-quarter GDP data and German employment figures.
Britain’s economy contracted by 0.3% in the final quarter of 2023 and 0.1% in the previous quarter, meeting the technical definition of a recession. However, January saw a return to growth.
On the other hand, the Bundesbank has suggested that Germany, the largest economy in Europe, may have entered a recession in the first quarter of 2024. Challenges such as surging energy prices and increasing borrowing costs have hindered any meaningful recovery.
Despite this, the Bundesbank notes that companies are retaining their workforce, potentially leading to only a slight increase in unemployment in the upcoming quarter.
Upcoming Economic Indicators
U.S. markets will release the Federal Reserve’s preferred inflation gauge, the core personal consumption expenditures (PCE) price index, on Friday. Analysts anticipate a 0.3% increase in February, maintaining an annual pace of 2.8%. The headline index is expected to rise by 0.4% for the month and 2.4% for the year.
Key developments to watch on Thursday include data releases for UK and U.S. GDP, German employment figures, U.S. consumer spending, and the University of Michigan consumer sentiment index. Earnings reports from Scout24 and Sofina, along with the UK government debt auctions, will also be in focus.
