EUR weekly currency update
The euro had a more difficult week than the pound but, to be fair, so did every other major currency. It lost a cent to sterling while adding a cent against an even weaker performer - the US dollar. Investors did not pay too much attention to the Euroland economic data. The only statistic for the euro zone as a whole was the Sentix index of investor confidence, which slipped half a point to 11.4. Of much greater interest was the ongoing spat about Italy's plan to run a budget deficit of 2.4% in 2019. The EU is opposed to the idea and so are investors, who have been staging something of a buyers strike when it comes to Italian government bonds. They currently require Italy to pay three percentage points more than Germany to borrow 10-year euros.
Sterling, meanwhile, had an easy run, strengthening by an average of 1.0%. Its main asset was a steady flow of news and rumour about an imminent Brexit deal with the EU. Optimists believe it could come as soon as Wednesday.
USD weekly currency update
The dollar could not really get anything right. Last Friday's US employment data were, on the face of it, pretty good, with 36k more people on nonfarm payrolls than analysts had forecast and the rate of unemployment down to 3.7%, its lowest level since 1969. But the 134k monthly payrolls increase was less than expected and that was the focus of investors. The only other top-tier US ecostat was inflation, which was also lower than expected at 2.3%. America's president did not help the dollar's case when he blamed Wednesday's stock market rout on the "crazy" Federal Reserve. The dollar lost an average of 0.8%, falling by two and a quarter cents against the pound.
Sterling's gains were primarily the result of ongoing news and rumour that a Brexit deal is about to be agreed with the EU. Some say it could come as soon as Wednesday. Fortunately for the pound, investors did not pay too much attention to some mediocre UK data for production, trade and growth.
CAD weekly currency update
The Loonie was easily the weakest among the major currencies, falling by an average of 1.5%. It lost half a US cent and was down by four and a quarter cents against the pound. It received no help whatsoever from a decent set of economic data last Friday: August's trade surplus was bigger than forecast and the addition of 63k jobs took the rate of unemployment down from 6.0 to 5.9%. A slowdown in housing starts was not as bad it looked at first sight; it simply represented a return to the long-term trend from last year's elevated levels. What really hurt the Canadian dollar was Wednesday's Wall Street sell-off. It sent investors scuttling for cover and they abandoned the supposedly "risky" commodity-oriented dollars.
A steady flow of positive Brexit news helped sterling to take the lead among the majors, despite some less-than-brilliant UK data for production, trade and growth. The word in Westminster was that a Brexit deal with the EU could be unveiled as soon as Wednesday, encouraging investors to reduce short-sterling positions.
AUD weekly currency update
Until Wednesday the Aussie looked reasonably chipper. The few Australian economic data worked in its favour, with improvements in both business and consumer confidence. However, when the US stock market went into reverse it sparked a flight to safety among investors. They abandoned the "risky" emerging market and commodity-related currencies in favour of the "safe" Japanese yen. The Aussie took less of a hit than the Canadian dollar, adding half a US cent, but it fell by a cent and three quarters against sterling.
The pound, at the same time, was at the top of its game, helped by a string of optimistic reports about an imminent Brexit deal with the EU. Investors might be pinning unreasonable hope on an announcement about that deal next Wednesday; it is not, after all, the first time that they have been told that a deal is just around the corner. But it was enough to persuade them to cut back on short-sterling positions.
NZD weekly currency update
While equities and other "risky" assets were being smashed on Wednesday the Kiwi got an easier ride than most. It added half a US cent but lost nearly two cents to sterling. On average it was unchanged against the other ten most actively-traded currencies. The NZ economic data were not particularly helpful: annual growth in electronic card retail sales slowed to 5.7% and the Business NZ purchasing managers' index came in slightly lower on the month at 51.7.
The UK economic statistics were not great either. House prices fell 1.4% in September, according to the Halifax. Like-for-like retail sales were down by an annual 0.2%. Manufacturing production was down by 0.2% in August and the trade deficit was wider than expected. But investors were tempted by a steady flow of positive stories about a Brexit deal with the EU, which could supposedly be revealed as soon as Wednesday. It was enough to put sterling at the front of the field with an average gain of 1.0%.