Euro area investors continue heading for the exits, December current account data shows

The euro area´s current account surplus dipped in December 2016 amid signs of continuing caution towards the single currency bloc on the part of investors.

In December, the current account surplus slipped to €36.4bn in November to €31.0bn, according to the European Central Bank.

For all of 2016 on the other hand, it improved to a record 3.4% of gross domestic product - to an extent a point of friction with Washington - after reaching 3.1% in 2015.

Nonetheless, Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, believed it would decrease in 2017 as the UK economy slowed.

On the other side of the balance of payments, looking at the financial and capital balances, the euro area´s net foreign asset position jumped by €123bn as holdings of foreign assets rose by €22bn, with the latter mostly made up of short-term protfolio investments.

"Compared to previous months, EZ investors were net buyers of foreign short-term debt securities, but the overall trend continues to suggest that EZ investors are shunning U.S. debt as the Fed prepares to raise rates and inflation expectations are rising. Overall, these data continue the trend of surging net foreign assets of EZ investors," said Vistesen.

In parallel, foreign investors were also heavy sellers of euro area debt instruments, Vistesen said, attributing it to "high" valuations in German bunds and perhaps as well fears of higher yields in periphery debt and French political risks.

"Foreign investors also reduced their EZ FDI assets sharply [...] Overall, these data continue the trend of surging net foreign assets of EZ investors."