Euro area’s current account surplus narrows in December

The euro area saw a current account surplus of EUR 29.9 billion in the month of December, large by historical standards but over EUR 5 billion lower than in November. A fall in the primary income surplus to a two-year low of EUR 3.7 billion fully accounted for the deterioration, while the other major components, such as surpluses on goods and services trade and secondary income, indicated a rebound.

In spite of the weaker reading at the end of the year, over 2017 as a while the current account surplus reached a new record high of 3.5 percent of GDP, up slightly from 3.4 percent in 2016. In the meantime, the figures for the financial account indicated that the principal trend of last year – foreign investors increasing their net holdings of euro area equity securities but lowering their net holdings of euro area bonds – continued in December.

That was in line with investors’ increased recognition of the marked rebound in euro area economic momentum in the course of the year, as well as associated expectations of a future phasing out of monetary policy accommodation by the European Central Bank.

Along with the ample current account surplus – the world’s largest in nominal terms – those flows were also widely in line with the appreciating euro, which is up around 8.5 percent in trade-weighted terms, and over 18 percent against the dollar, since the end of 2016, noted Daiwa Capital Market Research.

At 17:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at -47.6353, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 9.09207. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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