EUR weekly currency update
In a generally uninspiring week the euro and the pound fought themselves to a standstill, sterling hovering between €1.17 and €1.18 and ultimately going nowhere. The euro added a cent and a quarter against the US dollar.
An odd-lot of Euroland economic statistics brought something for everyone but nothing of any great importance. Industrial production was a good example: in April it increased by 2.2% in France and fell -0.3% in Italy while in Euroland as a whole the -0.6% decline was only half a bad as forecast.
Lurking in the background is the Karlsruhe constitutional court’s consideration of the European Central Bank’s flagship programme of supporting national government bonds using Outright Monetary Transactions (i.e. buying them). Were the court to decide that OMTs were beyond the ECB’s mandate it would scupper the Bank’s pledge to do “whatever it takes” to preserve the euro.
USD weekly currency update
In a largely uninspiring week the dollar was the worst performer among major currencies. It lost a cent and three quarters to the pound and one and a quarter cents to the euro. Compared with a month ago the dollar is down by four and a half cents against sterling.
After initial enthusiasm that the Federal Reserve would soon begin to wind down its money-printing and bond-buying programme, reality has set in. There will be no sudden switching off of the money tap and the Federal Reserve will not even start to reduce the flow until the US economy is performing to its satisfaction. Whilst that updated assessment has not done much to help the commodity and emerging market currencies, neither has it improved investors’ view of the dollar.
Last week’s US data failed to help the dollar’s case. A decent 0.6% monthly increase in retail sales did not send the dollar higher while lacklustre figures for industrial production and consumer confidence brought out the sellers.
CAD weekly currency update
In a broadly uninspiring week the Canadian dollar slid lower against sterling while edging upwards against the US dollar. It added a third of a US cent and lost one cent to the pound.
The Loonie is caught between the rock of association with the Greenback and the hard place of its status as a commodity and energy exporter. Last week it was the Canadian dollar’s link to the US dollar that held it back. After initial enthusiasm that the Federal Reserve would soon be winding down its money-printing and bond-buying programme, reality has set in. There will be no sudden switching off of the money tap. The prospect of $85bn a month continuing to flow from the Fed’s printing presses was detrimental to the Loonie and the US dollar alike.
There were no Canadian ecostats to help it out of its bind. The -2.4% monthly fall in manufacturing shipments was a particular disappointment.
AUD weekly currency update
After three weeks of losses the Aussie rebounded, rising a cent and a half against sterling. Against the dollar it added two cents.
Down by 14% at the beginning of the week from its March highs, investors were running out of reasons to sell the Australian dollar. They came to the conclusion that the downward move had been over-extended and looked to take profits on speculative short positions. Investors took a similar view with the New Zealand dollar and the South African rand.
They proceeded to do so, despite a shortage of plausible excuses from the Australian economic data. Mortgage lending went up much more slowly in April. Business confidence improved in May but only from -6 to a still-pessimistic -4. The Australian employment data were whatever investors chose to make of them: Unemployment ticked down to 5.5% with 1.1k more people in work but they were all part-time jobs; full-time employment was down by -5.3k.
NZD weekly currency update
Behind the Japanese yen the NZ dollar was the best-performing major currency. It strengthened by three and three quarter cents against sterling and by two and a half cents against the US dollar.
Down by 12% at the beginning of the week from its March highs, investors were running out of reasons to sell the New Zealand dollar. They came to the conclusion that the downward move had been over-extended and looked to take profits on speculative short positions. Investors took a similar view with the Australian dollar and the South African rand.
NZ economic data were limited to an unremarkable 0.5% monthly increase in credit card spending, a 0.7% rise in the REINZ house price index and a useful four-point rise in the Business NZ purchasing managers’ index which took it up to 59.2, its best level since before the global financial crisis.
Provided by Moneycorp