The latest balance of payments data from the euro area (covering November) point to an increasingly positive environment for Euro (EUR), with broadly improving inflows from overseas investors and a gradual slowdown in overseas investments by residents, NOMURA's economist Dominic Bunning reports.

UK wage data points to continued BoE easing bias

"Equity inflows are positive and increased through most of H2 2025. Despite many investors asking us 'what is the alternative' to US equity investments, financial account flows show persistent foreign inflows into euro area equities, averaging just below EUR40bn per month since June 2025. Meanwhile, euro area residents, on average, bought around EUR25bn of overseas equities over the same period. Debt inflows are also positive, with non-residents buying euro area bonds and euro area investors buying fewer overseas assets. After a big outflow by domestic investors in September, there was a sharp slowing to just EUR10bn of overseas debt purchases in November, the lowest since October 2023. Foreign investors bought a little over EUR40bn of euro area debt in November, and have averaged a touch more than this since June 2025."

"Meanwhile, the latest intensification of geopolitical tensions by US President Trump on Greenland is more likely to result in a return to the 'Sell America' theme seen in April 2025, in our view, which would benefit the euro area as one of the few genuine alternative destinations for investments in terms of size and liquidity. The euro area accounts for a significant portion of US external liabilities, and while this masks some beneficial ownership from elsewhere routed through the euro area, it is clear that a rotation out of US investments could have a significantly positive impact on EUR."

"On the GBP leg of our trade, today's UK labour market data showed continued soft momentum in wage growth, in our view limiting the risks that many MPC hawks have cited of a significant shift higher in underlying inflation/wage-setting behaviour, though they may need to see more data to be convinced of this view. Other data were not as soft but do not yet point to a meaningful acceleration in the labour market, leaving us happy with our view that the risk for the BoE is tilted towards more rather than fewer rate cuts."