Germany enjoys record year of international trade

Enrique Díaz-Álvarez10/Φεβ/2015Currency Updates


A quiet start to the week for the UK economy saw Sterling decline by 0.3% against the Dollar. Despite heavy losses against Greenback in the past few months, the Sterling Exchange Rate index (ERI), a trade weighted measure of the UK currency as measured by the Bank of England, is currently at its strongest position since October 2008. The index, which represents the UK currency against its major trading partners using 2005 as its base year, reached as high as 89.4 in the past week.

On Monday morning Prime Minister David Cameron chaired an hour long meeting with senior officials amid increased speculation that a Greek Eurozone exit or “Grexit” is a possibility. While we still expect the situation in Greece to be resolved, UK officials are preparing contingency plans behind the scenes should a shock Greek exit from the Eurozone materialise. The stand-off between Greece and the Eurozone increases risks to Britain “every day”, according to the Chancellor George Osborne.

No significant data out in the UK yesterday. The week’s main event will take place on Thursday as the Bank of England publishes its quarterly inflation report. Given price growth plunged to 0.5% in December, the central bank is poised to slash forecasts once again as downward pressures on inflation continue to intensify. However, equally key will be its latest forecasts for employment.


Speculation surrounding Greece continues to dominate news. Strong data was not enough to prevent single currency depreciation by 0.1% versus the US Dollar.

Data released as markets opened for the week suggest that the German economy is in good shape both externally and internally. Europe’s largest economy experienced a record year for trade according to the country’s statistics office, Destatis. Exports and imports both hit all-time yearly highs, with the trade surplus for 2014 of €217 billion surpassing the previous record of €195.3 billion set in 2007. This was aided by a monthly 3.4% increase in exports and a 0.8% decrease in imports in December.

Investor confidence in the Euro-area, as measured by Sentix, surprised on the upside on Monday. The monthly market opinion survey improved to its highest level in nine months, alleviating some of the concerns regarding the economy’s short term outlook. The index rose sharply this month to 12.4, up from just 0.9 in January and well above the 3.0 print that was forecast. Meanwhile, Greece’s new Finance Minister Yanis Varoufakis has warned that an exit from the Eurozone would lead to others following suit, causing the “fragile” Euro to collapse.

A very quiet day in the Eurozone in terms of data today as market focus will shift to Friday and the announcement of growth data for Q4.


The Dollar rose on Monday as markets continued to digest last Friday’s encouragingly strong employment data. The US Dollar index finished trading 0.1% higher despite a lack of significant data releases.

The Federal Reserve’s Labor Market Conditions index, a weighted measure of a variety of labour market indicators, declined in January. The index, introduced by Chairwoman Janet Yellen last year in order to provide a broader reflection of the labour market situation, printed lower in January at 4.9 compared to 7.3 in December. This was the lowest reading since October, although was mostly overlooked by markets, with limited Dollar movement as a result.

Mostly second-tier data releases in the US today, with the main announcement that of Wholesale Inventories for December at 3pm.

Rest of the world

Turkey’s Lira fell to an all-time low on Monday after President Erdogan heaped pressure on the central bank to cut rates by renewing his attack on policymakers.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.