US futures saw an uptick of 0.2-0.4% in early trading, indicating optimism among investors. Meanwhile, the EUR/USD pair remained defensive around the 1.0300 mark during the European session on Friday. On the other side of the globe, China's economy showed resilience with a steady performance throughout 2024, according to the National Bureau of Statistics (NBS) Official. The country successfully met its official GDP target of 5% for the year. However, in the United Kingdom, disappointing December retail sales data led to a 0.5% decline in the GBP, testing levels below 1.2180.
China's economic momentum continued in December, with industrial production growing at 6.2% year-on-year, surpassing the expected 5.4%. Retail sales in China also rose by 3.7% year-on-year, exceeding expectations of a 3.5% increase. In contrast, markets in Asia displayed mixed results, with New Zealand's NZX50 index outperforming others with a 1.0% gain.
The UK's December retail sales data presented a challenging outlook for the British economy. Retail sales, including auto and fuel, fell by 0.3% month-on-month, missing expectations of a 0.4% increase. Year-on-year figures showed a 3.6% rise against an expected 4.9%. Excluding auto and fuel, retail sales dropped by 0.6% month-on-month, contrasting with an anticipated 0.3% increase, and rose by 2.9% year-on-year compared to a forecast of 4.0%. These figures contributed to the pound's depreciation against major currencies.
Despite the UK's retail sales setback, European markets experienced a surge in risk appetite. Germany's DAX and the UK's FTSE100 reached record highs as investors were buoyed by a significant drop in bond yields. This environment of increased risk tolerance has been further influenced by discussions among European car manufacturers who are advocating for a "grand bargain" with former US President Donald Trump to avoid potential trade conflicts.
In the United States, Federal Reserve Governor Christopher Waller highlighted that if inflation figures continue to mirror those of December, it might be reasonable to anticipate interest rate cuts in the first half of 2025. This perspective has added another layer of complexity to market anticipations as investors weigh the future trajectory of monetary policy.
China's fourth-quarter GDP growth also outperformed expectations, registering at 5.4%, aligning with its full-year target of around 5%. This positive data reinforced China's economic stability and contributed to global market dynamics.
The defensive stance of the EUR/USD pair suggests caution among traders amid mixed global economic signals and geopolitical considerations. As traders digest these developments, market volatility may persist as new data emerges and geopolitical negotiations unfold.