Market Overview

German Wage Growth Concerning

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The euro slipped on Friday morning as the dollar gained momentum due to the Fed's decision to taper. The common currency traded at $1.3627 at 4:00 GMT on Friday morning.

On Wednesday, the US Federal Reserve announced that it had decided to begin tapering at its December policy meeting. The decision surprised some who were expecting the bank to wait until March of next year to begin cutting down on its $85 billion per month bond buying plan. The bank will trim its monthly asset purchases by $10 million.

See also: #PreMarket Primer: Friday, December 20: Housing And Jobs Data Create A Small Wrinkle In US Outlook

Markets reacted relatively calmly to the news without any major crises. The Fed promised to maintain a low interest rate for as long as needed, and assured investors that the US economy was strong enough to stand on its own.

In Europe, troubling German data put pressure on the common currency as well. The Wall Street Journal reported that earnings in the bloc's most powerful nation grew by only 1.3 percent, and the figure adjusted for inflation worked out at just 0.3 percent growth.

The data was troubling to investors who were already worried about the bloc's struggle with inflation. Wage development is considered a good indicator of inflationary pressure, and Germany's slow wage growth could suggest that deflation is a real threat.

Labor reforms implemented by former Chancellor Gerhard Schroder encouraged Germans to take lower paying, part time jobs over the past decade.

Now, while the unemployment rate has fallen considerably, wages have suffered. Since German data is usually pulling along periphery eurozone members, many worry that Germany will not be able to lead the rest of the region through deflation worries.

Posted-In: News Eurozone Commodities Forex Events Federal Reserve Pre-Market Outlook Markets Best of Benzinga

 

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