Euro weakens ahead of new year

The Euro remains below the 1.11 mark against the greenback during the early Asian trading hours on Friday after yesterday’s losses and unless something unusually wild happens on the last trading day of the year it seems as if this is where it will remain.

The hawkish stance from the European Central Bank (ECB) lent some support to the Euro (EUR) and acts as a tailwind for the EUR/USD pair. The ECB policymakers pushed back against market expectations and highlighted that the central bank’s policy decisions are data-dependent and not influenced by market pricing or time-bound pressures which means a rate cut is still up in the air.

Unlike the ECB, the Federal Reserve (Fed) delivered rather dovish remarks, and traders anticipate the US central bank will cut interest rates in the first part of next year. According to the CME FedWatch Tool, the markets have priced in over 87% odds of a rate cut in the March meeting.

Data out yesterday showed a faltering jobs market with the US Initial Jobless Claims for the week ending December coming in at 218,000 new jobless benefits seekers from the previous week of 206,000, well below analysts’ expectations for a figure of 210,000. The real estate market is also showing signs of weakening with US Pending Home Sales in November coming in flat at 0% and weaker than 1.0% expected.

As mentioned earlier, the market is likely to be quiet on the last trading day of 2023. Spain’s preliminary readings of the December Consumer Price Index (CPI) and the US Chicago Purchasing Managers’ Index (PMI) for December are due on Friday.