Thread: Weekly currency updates

Hi all - please see a selection of currency updates below, thanks.

EUR weekly currency update
Ahead of what would be a 13th EU summit crisis meeting in 21 months, investors were warned not to build their hopes too high. There was clear disagreement between France, who wanted to set up the European Financial Stability Facility as a bank, funded by the European Central Bank, and Germany, who wanted it to look more like a supranational insurer, to be called on only in extremis. True enough, there was no agreement on that issue at the weekend but there were signs that France was leaning towards the German plan.

Everything now hinges on the 14th summit this Wednesday. Until then, investors have little alternative but to sit on their hands and wait to see what transpires. Thereafter, the fate of the euro will depend on whether there really is a comprehensive solution to the southern European debt crisis or if this latest effort is yet another fudge.


USD weekly currency update
Expectations for the last weekend's EU summit meeting were sufficiently well managed to avoid any semblance of panic, both ahead of and after the event. The euro and the US dollar moved roughly together, falling behind the pound and the yen but only by a cent or so.

As it had the previous week, investors' preoccupation with events in Euroland did not match the nervousness of earlier in the month so there was still no pressure to buy the US dollar. It seemed that the few who did feel an urge for safety preferred to seek it in the Japanese yen and Swiss franc.

Among the US economic data, the most important would normally have been the inflation numbers: consumer prices rose by 3.9% in the year to September. But as in Britain there is currently no linkage between inflation and interest rates so the news made little difference to sentiment.


AUD weekly currency update
The Australian dollar took fourth place in the hierarchy of major currencies but was only a little down from the top three; the franc, the yen and the pound. While investors were not afraid of the antipodean commodity dollars, neither were they eager to stock up with them while the Euroland debt resolution was in the balance.

The Australian economy had almost nothing to say for itself during the week. The minutes of the Reserve Bank of Australia's monetary policy meeting offered no guidance as to how the coming meeting might go. Analysts believe this week's core inflation figures, for the September quarter, could be the deciding factor. At least as important to the Aussie, however, will be that Euroland summit meeting on Wednesday. If it rekindles worries about a return to recession the AUD will feel the downward pressure


NZD weekly currency update
As with the Australian dollar, the Kiwi maintained a low profile on the ecostat front. The only figures of any consequence were those showing a 1.6% rebound for credit card spending in September after a -1.4% decline in August. There was nothing to excite either buyers or sellers and the NZD pottered along in the wake of the Australian dollar.

Things might be more interesting this week, with September's inflation numbers early on Tuesday and the Reserve Bank of New Zealand's monetary policy decision the following day. There will not necessary be a connection between the two. The RBNZ is more likely to focus on the uncertainties of the global economy than it is to begin unwinding the emergency rate cut it delivered in March in response to the Canterbury earthquake. No change is expected to the 2.5% official cash rate.


CAD weekly currency update
The Canadian dollar did little to distinguish itself. As a consequence it languished between the euro and the US dollar in the bottom half of the table. The week's most important economic data were Friday's consumer price index numbers. They showed headline CPI inflation slightly higher at 3.2% with a bigger jump in the core rate of inflation from 1.9% to 2.2%.

The acceleration in inflation would normally mean a greater likelihood of higher interest rates after this Tuesday's Bank of Canada policy meeting. However, the mood of the world's central banks right now is to support the economy and to turn a blind eye to inflation. The BoC's stance is likely to be no different, especially if the retail sales figures announced that same morning are anywhere near as soggy as the previous month's -0.6% slippage. The EU's announcement about a southern European debt solution on Wednesday evening will be important to the Loonie's performance but the effect will be diluted by the CAD's close attachment to the US dollar.

Hi all - please find the latest weekly currency updates below.

EUR weekly currency update
Last Wednesday night EU leaders revealed their latest plan to salvage the wreckage of Greece's economy and to prevent Italy following her onto the same rocks. The proposal was not tightly-crafted or finely-honed; that stage is months away. It was, however, an acceptable working model and investors looked kindly upon it. The plan's announcement sparked a round of buying for the euro.

But there was no follow-through. A cent-and-a-half rally was all investors were prepared to grant – mainly because so many other things have to go right in order for it to work. The biggest gap in the plan at this stage is where the money will come from; roughly €100bn to beef up banks' reserves and €750bn to make the EFSF bailout fund big enough to handle Italy or Spain if necessary. The world is no longer quite so worried about the euro, but a genuine love for it is way down the road.


USD weekly currency update

For what might be the last week in this latest phase of the southern Euroland debt crisis, the dollar continued to rely for its fortune on not being the euro. And that wasn’t helpful on Wednesday night and Thursday morning after the EU rescue plan was revealed. With a plausible eurozone rescue plan in place (however unpolished) there was a little less reason for investors to cling to the perceived safety of the US and Japanese currencies.

The US facts and figures didn’t punch many buttons for the dollar either. The one which might reasonably have been expected to help was third quarter gross domestic product figures that showed the economy growing at an annual rate of 2.5% in Q3, equivalent to quarterly expansion of 0.6%..Compared with anything else in the western world it was a good figure. So investors sold the dollar because there was one less economic worry to concern them.


CAD weekly currency update
Intriguingly, the Canadian dollar strengthened against sterling by 0.5% over the week – exactly the same proportion by which the New Zealand dollar and the euro went up. All three came about for the same reason: the EU agreement on a plan to resolve the southern European debt crisis. The news came on Wednesday night and sent the euro higher for obvious reasons. Less obvious was investors' associated decision to move back into commodity-related currencies. The logic there was that a solution for Euroland was a step back from the brink of another recession and a step towards renewed global growth.

The Canadian economic statistics didn’t bring much to the party, just a usefully healthy 0.5% monthly increase for retail sales in August. On the downside, the Bank of Canada lowered its forecast for future growth. In its quarterly Monetary Policy Report it slashed a percentage point from next year's forecast. The current guess is 1.8%, rather than the previous 2.8%. This is not a worrying development, more a falling in line with other developed country downgrades as everyone reduces their debt.


AUD weekly currency update
The Australian dollar was in the top currency division for the week, strengthening by more than 1% against the pound. That was twice as much as the euro achieved, even with the benefit of the latest agreement to resolve the southern Euroland debt crisis.

The AUD is sensitive to economic activity on China because exports of coking coal and iron ore to that country (among others) are a significant part of Australia's economy. Were Europe to falter and slow it would dampen global demand for China's exports, so reducing China's demand for the materials that go into their production. Because Europe has apparently taken a major step towards getting its act together, the risk of a return to recession is lower – and the Aussie is higher.


NZD weekly currency update
The NZD, the euro and the Canadian dollar were in step with each other last week. All three rose by 0.5% against the pound, lagging behind the Australian dollar and the rand but leaving the US dollar and the yen to eat their dust.

As is often the case, the Kiwi's relative success or failure is a side effect of investors' confidence about the world economy as a whole. When they are upbeat, investors buy the Commonwealth dollars because they expect demand for their commodity and energy exports to be strong. EU leaders agreed last Wednesday night on a plan that appears to tick most of the boxes for a resolution of their southern debt crisis, so lowering the risk of a return to recession. The Kiwi prospered as a result.

EUR weekly currency update

The accelerating flow of game-changing news from Euroland has stunned investors into inactivity. In the space of little more than a fortnight, there has been a summit agreement on an all-embracing rescue plan, a call for a referendum in Greece, the resignation of the Greek premier, a boycott of Italian sovereign debt, the appointment of an economist as prime minister in Greece, the resignation of the Italian PM and the drafting of another economist to take the helm in Rome.

And after all that, southern Euroland is no further ahead on the route to fiscal balance. With technocrats in charge, investors believe there is now more potential for Greece and Italy to avoid financial disaster – but that is all it amounts to: potential. Investors this Monday forced Italy to pay a 6.29% rate of interest on five-year borrowings, having extracted 6.09% for one-year money last Thursday. The equivalent cost to Germany would have been 0.38% and 0.98% respectively. So much for a single currency.

USD weekly currency update

The US dollar kept itself to itself last week, ebbing and flowing as unfolding events in Euroland sent investors hither and thither. One day a new disaster sent them dashing for the trenches and buying the dollar, the next they were chortling at a breakthrough that would solve the southern debt crisis forever. In the end, investors decided there was nothing to chose between the pound, the dollar and the euro. After seven days of fluster, there was less than half a cent of difference between the three.

The dollar's difficulty is that when the US economy does well, investors abandon it. They feel they no longer need its protection. When the University of Michigan announced on Friday that its index of consumer sentiment had improved by 5.4% to 64.2, investors sold the dollar. Granted, the dollar was already on the way down as a result of a new technocrat prime minister in Greece, but if people only buy it as a last resort in times of trouble its future could be strained.

CAD weekly currency update

With Euroland dominating investors' behaviour yet again, the Loonie was torn between following the Commonwealth commodity dollars and sticking with the Greenback. In the end, it held station with a cluster that included the US dollar, the euro and the pound. All four started this week within half a cent of their positions seven days earlier.

The Canadian economy brought almost nothing to the party, with less than a handful of meaningful statistics. Housing starts in October were stronger than expected. The new housing price index went up by 0.2%. Canada's balance of trade in September registered a C$1.25bn surplus. They were decent figures, but not good enough to give the Canadian dollar a life of its own. This week's inflation numbers will be less easy for investors to ignore, but with Euroland front and centre they might do that anyway.

AUD weekly currency update

The Aussie dollar managed to avoid the spotlight last week. That task was made easier by the market's obsession with developments in Euroland, where prime ministerial resignations were coming thick and fast. Italy's premier followed his Greek colleague out of the back door, making way for another non-political economist to take the helm. Having been less than enthusiastic about the Australian dollar during the early part of the week, investors rediscovered their appetite for it on Thursday and Friday.

Australian economic indicators were close enough to forecast that investors paid them little attention. Business confidence improved from -1 to +2, even though (current) business conditions apparently deteriorated from +2 to -1. Consumer confidence was up by 6.3%. Home loans rose by 2.2% in September. Employment grew by 10.1k in October, with only half as many new jobs as the previous month – but the unemployment rate was steady at 5.2%. There was nothing there to distinguish the Aussie, but nothing to trip it up either.

NZD weekly currency update

The NZ dollar was last week's tail-end Charlie, through no real fault of its own. A 2.2% quarterly increase for retail sales in the third quarter, announced this Monday morning, was nearly four times as big as expected but had no more than a temporary upward effect on the Kiwi. Although last Thursday's Business NZ purchasing managers' index was somewhat soft, down four points at 46.5, there was no punishment from investors.

Once again, the chief driver of the NZ dollar's fortunes was the ever-changing sentiment of investors towards the euro, and how they foresaw problems in Euroland affecting the global economy. For four days, sentiment was negative and the Kiwi went lower. Thursday brought a new optimism, with hopes that technocrat leaders would be brought in to head Greece and Italy. The Kiwi strengthened. It isn't much of a life, but it is one to which the NZ dollar has had to become accustomed in recent months.

The latest currency updates are below – thanks

EUR weekly currency update

When G20 leaders met at the end of last week, they were far from enthusiastic about Brussels' proposal that they put their hands in their pockets for the European Stability Fund. Nor were they keen to chip in more money for the International Monetary Fund. Their attitude was that Euroland's problems were not theirs to solve, especially as EU leaders themselves had not yet agreed to increase their subscription to the bailout fund beyond its current €500bn limit.

An EU summit later this week will presumably address the matter, but there is no assumption that Germany will want to play. Finance minister Wolfgang Schäuble has already rejected the idea of "ever bigger" rescue funds.

Yet the euro has not fared badly. Investors seem relaxed about the potential downfall of Greece as long as it doesn't sink the banks. And the European Central Bank will further reduce that risk this week, when it hands out what could well be a second €500bn of cheap loans to the banking sector. The euro is not bomb-proof, but at least it remains watertight for the moment.

USD weekly currency update

The pound and the US dollar fared equally well – or badly – last week, falling behind the rejuvenated euro and leaving the latest whipping boy, the yen, in their wake. It was not the usual risk-on/risk-off pendulum moving currencies: investors were upbeat, but that wasn’t enough to prevent the commodity-related dollars bringing up the rear. Instead, it was the continental European currencies that led the way. The dollar (and the pound) didn’t fit into that category so wandered around in mid-field with no clear sense of purpose.

US economic statistics added nothing to the debate, not least because they were in short supply. On the housing front, existing home sales rebounded strongly in January while new home sales went into reverse. Weekly jobless claims were steady. With nothing to distinguish itself, the dollar's performance was undistinguished.

CAD weekly currency update

For no particular reason, the Canadian dollar decided last week to align itself with the antipodean commodity dollars instead of the American one. The damage was not severe: the CAD lost less than a cent and a half to the pound and was closely grouped with the AUD and NZD.

The Loonie had no opportunity to fight back. Only on Tuesday was there any Canadian statistical evidence and it was not particularly inspiring. Wholesale sales were decent enough, rising by a robust 0.9% in December, but retail sales for the same month were not. Falling by -0.2% they made it look as though retailers had stocked up with goods they were then unable to shift.

The number to watch this week is Thursday's figure for fourth quarter economic growth. It will be slower than in the previous three months but, at an annualised 1.8%, should look respectable.

AUD weekly currency update

The three colonial commodity dollars stuck fairly closely together, all falling about 0.8% behind the pound and the US dollar. With the Japanese yen still under the cosh and the euro enjoying a bit of a renaissance, the trio was out of the headlines and left by the wayside.

Australian economic data failed to come to the Aussie's rescue, even though they were not at all bad. The Conference Board's leading index (which aggregates forward-looking statistics to predict the course of the economy) and an equivalent leading index from Westpac both swung from negative to positive, implying future economic expansion. The wage price index was steady in the fourth quarter of 2011, with growth at an annual 3.6%. The salient figures this week cover new home sales, building permits, retail sales and manufacturing activity.

NZD weekly currency update

The three colonial commodity dollars stuck fairly closely together, all falling about 0.8% behind the pound and the US dollar. With the Japanese yen still under the cosh and the euro enjoying a modest renaissance, the trio was out of the headlines and left by the wayside.

Just two New Zealand statistics were provided to motivate investors in the Kiwi dollar. Neither was much of an incentive. The latest Reserve Bank of New Zealand survey of inflation expectations, conducted in January, found consumers to be expecting price rises averaging 2.5% this year where previously they had put the estimate at 2.8%. The figure did nothing to boost expectations of higher interest rates. Annual growth in credit card spending halved in January to 3.1% (in the year to December it grew by 5.9%). Here too, the numbers did nothing to assist the NZ dollar.