EUR/USD falls as Eurozone’s growth decelerates

Today’s headlines

What’s happening: The euro fell against the US dollar on Friday but recorded gains for the week.

What happened: Although most economic data was positive, investors responded to the deceleration in Eurozone’s economic growth on Friday.

Strength in the US dollar also exerted pressure on the EUR/USD forex pair.

Why it matters: Data released on Friday showed that Eurozone’s economy expanded by 1.4% year-over-year in the third quarter, up slightly from the previous estimate of 1.3%. However, the latest reading represented a deceleration from the 1.5% growth recorded in the previous quarter.

Spain led the expansion among major economies, growing 2.8%, followed by the Netherlands and France.

The number of employed persons in the Eurozone climbed by 0.1% to 172.049 million during the third quarter. The growth remained sequentially flat and came in-line with market estimates. It marked the 18th consecutive quarter of employment growth in the Eurozone.

The Eurozone’s trade surplus surged to €19.4 billion in September, from €12.9 billion in the year-ago period. Exports grew 7.7%, while imports rose 5.3% during the month.

The greenback rose as investors awaited the release of delayed economic reports for more insights into the Federal Reserve’s future monetary policy. Strength in the US dollar weighed on the EUR/USD forex pair on Friday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained over 0.1% to 99.27.

The EUR/USD fell around 0.1% to 1.1621 on Friday but ended the week with gains of 0.5%. The forex pair extended losses at the start of new week, falling 0.1% this morning. Meanwhile, the STOXX Europe 600 Index declined by 1.01% to close at 574.81 on Friday but gained around 1.8% last week.

What to watch: With no major economic reports scheduled for release today, investors await data on current account, inflation rate and labour cost index on Wednesday. The Eurozone’s current account surplus, which shrank to €13 billion in August from €25.3 billion in the year-ago period, is expected to widen to €34.0 billion in September.

Analysts expect the Eurozone’s consumer price inflation to slow to 2.1% in October, from 2.2% in the previous month. Hourly labour costs in the Eurozone are expected to rise by 3.2% year-over-year in the third quarter, slowing from 3.6% in the second quarter.

The markets today

Japan’s stocks in focus today ahead of some major economic releases this week

Context: Equity markets in Japan fell this morning as investors assessed the latest GDP data.

Details: Data released this morning showed Japan’s economy contracted by 1.8% on an annualised basis in the third quarter, following 2.3% growth in the previous quarter. Although the figure came in better than market estimates of a 2.5% decline, this marked the first annualised contraction in six quarters and was a result of weak private consumption.

Investors continued to assess the Bank of Japan’s policy outlook amid signals from central bank officials that they may hike interest rates soon. These comments came despite Japan’s Prime Minister Sanae Takaichi urging the BoJ to keep interest rates low.

Weakness in Japanese stocks mirrored the pressure on US stocks on Friday amid continued concerns around AI stocks being overvalued. Sony Group, Nidec and Fast Retailing were among the top losers this morning.

Japan’s Nikkei 225 fell 0.68% to 50,032.72, while the TOPIX index dipped 0.72% to 3,335.57 this morning, extending losses from the previous session. The USD/JPY forex pair gained around 0.1% to 154.63.

What to watch: Data on Japan’s balance of trade and machinery orders will be released on Wednesday. Japan’s trade deficit, which narrowed to ¥234.6 billion in September from ¥306.1 billion in the year-ago period, is expected to expand to ¥280 billion in October.

Japan’s core machinery orders, which declined 0.9% to ¥8890 billion in August, is expected to surge by 2.5% in September.

Other Markets: US trading indices closed mostly lower on Friday, with the Dow Jones index and S&P 500 down by 0.65% and 0.05%, respectively, and the Nasdaq 100 up by 0.06%.

The news shaping the markets

Ukrainian General Staff said that its forces had hit the Novokuibyshevsk oil refinery in the Samara region of Russia. The news sent the RUB/USD pair lower in forex trading this morning.

Singapore’s non-oil domestic exports surged 22.2% year-over-year in October, up from 7.0% in September, which lent support to the SGD/USD forex pair.

Israel’s economy contracted at an annualised rate of 3.9% in the third quarter. This representing a rebound from the 4.3% decline in the previous quarter sent the ILS/USD pair higher in forex trading this morning.

New Zealand’s BusinessNZ Performance of Services Index climbed to 48.7 in October, from 48.3 in the previous month. Services activity remaining in the contraction zone for 20th consecutive month exerted pressure on the NZD/USD forex pair.

Colombia’s retail sales jumped 14.4% year-over-year in September, accelerating from 12.4% in the previous month, which sent the COP/USD pair higher in forex trading this morning.

What else to watch today

Italy’s inflation rate (1300 UAE Time), South Africa’s 182-day T-Bill auction (1330 UAE Time), 273-day T-Bill auction (1330 UAE Time), 364-day T-Bill auction (1330 UAE Time) and 91-day T-Bill auction (1330 UAE Time), Germany’s 12-month Bubill auction (1430 UAE Time), India’s unemployment rate (1430 UAE Time), Brazil’s IBC-BR economic activity (1600 UAE Time), Canada’s inflation rate (1730 UAE Time), foreign securities purchases (1730 UAE Time) and new motor vehicle sales (1730 UAE Time), US NY Empire State manufacturing index (1730 UAE Time), 3-month Bill auction (2030 UAE Time), 6-month Bill auction (2030 UAE Time) and NOPA Crush report (2100 UAE Time), as well as France’s 12-month BTF auction (1800 UAE Time), 3-month BTF auction (1800 UAE Time) and 6-month BTF auction (1800 UAE Time).