Dollar reverses from 6-week highs.
The Euro-Zone current account surplus widened to EUR15.9bn for December from EUR12.8bn the previous month and well above consensus forecasts of EUR5.1bn.
For 2022 as a whole, the there was a deficit of EUR106bn and 0.8% compared with a surplus of EUR282bn and 2.3% of GDP in 2021. There was, however, a much stronger position for the fourth quarter of the year as energy prices declined.
ECB council member Schnabel stated that a 50 basis-point rate hike is needed for March under all scenarios and that the bank is still far away from claiming victory in the inflation battle. She added that there was a risk that markets will under-estimate inflation.
Richmond Fed President Barkin stated that he is seeing some progress on inflation with demand normalising. He also stated that he is not taking a signal from the jobs and retail sales data due to seasonal adjustment factors.
The dollar held strong in early trading on Friday and the currency index posted 6-week highs, but there was a notable reversal after the New York open with net losses on the day and little net change on Monday.
US markets will be closed for the Presidents Day holiday on Monday which will dampen activity.
The latest PMI business confidence data will be released on Tuesday with data from the Euro-Zone, UK and US. The data will be important for confidence in the global outlook and the relative outlook for major economies with evidence on demand and inflation watched closely.
The Euro remained under pressure in early Europe on Friday with further speculation over a hawkish Fed stance. US yields gradually moved lower during the day which curbed dollar support. Risk appetite also attempted to stabilise which curbed defensive dollar demand. EUR/USD dipped to lows just below 1.0615 before a strong rebound to near 1.0700.
The decline in US yields helped trigger a recovery in the yen. USD/JPY dipped to lows around 134.20 late in the New York session. Some speculation over a Bank of Japan policy shift underpinned the yen on Monday with USD/JPY close to 134.00.
Hawkish ECB rhetoric sapped Swiss franc support, although with limited impact. EUR/CHF settled just below 0.9890 with USD/CHF dipping to below 0.9250 from highs at 0.9330.
Sterling gradually recovered ground during Friday amid a wider dollar retreat. A slightly more positive risk tone also helped Sterling recover. GBP/USD rallied strongly to near 1.2050 from 1.1915 lows.
Commodity currencies recovered as the US dollar lost ground. Hopes for a Chinese recovery underpinned the Australian currency. AUD/USD rallied to 0.6880 from 0.6815 lows and edged just above 0.6900 on Monday. USD/CAD retreated to 1.3475 from 1.3535 highs and settled around 1.3470 on Monday.