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Greenback gives Loonie a flying lesson

Dollar bucks data

There was a mismatch on Friday between a fairly disappointing set of US economic data and a US dollar that shared the lead with the Australian dollar. It was not a big lead: most currencies did not go far on Friday and the two dollars' average advantage was just 0.3%.  

America's two manufacturing sector purchasing managers' indices came in at 53.0 (Markit) and 54.2 (ISM). Both were a couple of points lower on the month and at least a point shy of forecast. At the same time the University of Michigan consumer sentiment index showed an improvement over January's low - 93.8 against 91.2 - but missed forecast by two points.  

The dollar did weaken briefly ahead of the data's release but there was a lack of enthusiasm to the selling. It is possible that investors remained struck by Thursday's gross domestic product figures, which showed the US economy expanding at an annual pace of 2.6% in the fourth quarter. That is equivalent to QoQ growth of 0.6%, three times the pace of Euroland and Britain. The result was a US dollar that remained in touch with the euro and moved a quarter of a cent higher against sterling.

Loonie crash lands

Canada's dollar had a very different day, falling an average of 0.7% and losing a cent and a third to sterling. Canadian GDP grew by an annualised 0.4% in Q4 , a third as much as forecast and equivalent to quarterly growth of just 0.1%. That is one tick away from stagnation.

Annual growth for calendar 2018 in Canada was 1.8%, following a 3.0% expansion in 2017. The comparison looked dramatic and investors sharply marked down the Canadian dollar. It lost three quarters of a cent to the US dollar. Canada's manufacturing PMI, half a point lower at 52.6, did not do much to help.

Over the weekend the noises-off came from the US president and the Brexit arena. In a two-hour rant worthy of any autocrat, Trump again blamed the Federal Reserve chairman for tightening monetary policy and for creating an unduly strong dollar. In Europe there were signs that a delay to Article 50 is beginning to look inevitable, even if the Tory rebels cave in to support the prime minister's withdrawal bill next week.

Mostly Australia

There is not much on today's agenda for Europe or North America. It is bracketed by Australian news - this morning job advertisements and building permits, tonight the services PMI and the Reserve Bank of Australia's rate decision and statement.

Australian job adverts fell 0.9% in February after a 1.8% drop in January.  January's building permits were up by 2.5% on the month and 28.6% on the year. The analysts are silent on how this evening's services PMI for February will compare to the previous month's 44.3. The RBA is confidently expected to keep its benchmark Cash Rate target unchanged at 1.5% for a 32nd month.

Britain's construction PMI is pencilled in at 50.3, Euroland investor confidence at -3.1 and the monthly rise in US construction spending at 0.2%. Watch out for news about a Sino-US trade accord and a possible acceleration of the Brexit vote currently scheduled for next Tuesday.

GBP Delay to Article 50 looking ever more likely

GBP Delay to Article 50 looking ever more likely

EUR Steady against USD

EUR Steady against USD

CAD Downed by surprisingly weak GDP

CAD Downed by surprisingly weak GDP

USD President blames Fed for unduly strong dollar

USD President blames Fed for unduly strong dollar

AUD Reserve Bank expected to stick at 1.5% tonight

AUD Reserve Bank expected to stick at 1.5% tonight

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