Weekly Brief

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Weekly Brief - 14th September 2018

EUR weekly currency update

The euro had a considerably better week than the US dollar, the Swiss franc and the Japanese yen. It added two thirds of a US cent, two thirds of a Swiss cent and almost two and three quarter yen. Yet it still fell by an average of 0.3% against the other ten most actively-traded currencies and lost a cent to sterling. To a large extent the euro was caught up in a general drift away from safe-havens into higher-yielding and theoretically more risky currencies. The US administration was the main driver of that shift: talk of new protectionist tariffs on a raft of Chinese products gave way to talk of renewed trade negotiations with Beijing.

Although sterling had to take third place to the South Africa rand and Norwegian krone it strengthened by an average of 0.6%. Its gains were achieved principally on the back of EU negotiator Michel Barnier's comment that a post-Brexit trade deal could be less than two months away.  

USD weekly currency update

Only the Japanese yen and Swiss franc had a worse week than the dollar. It lost two thirds of a cent to the euro and almost two cents to sterling. The dollar's retreat owed most to a more relaxed attitude to risk among investors which was itself mainly attributable to the US administration. Talk last weekend of tariffs on another $200bn of Chinese goods was superseded by news that the White House was seeking to restart trade talks with Beijing.  Lower than expected US price data accentuated the decline: producer prices fell 0.1% in August and consumer price inflation slowed from 2.9% to 2.7%.

The pound had a much better time of it, mainly as a result of comments by EU negotiator Michel Barnier. He said a Brexit deal was achievable in six to eight weeks. As if to reinforce that prospect, the European Council scheduled a meeting to discuss Brexit on 13 November.

CAD weekly currency update

The Loonie delivered a respectable performance, strengthening by an average of 0.2% against the other ten most actively-traded currencies. It added three quarters of a US cent but lost three quarters of a cent to sterling. Two things worked in the Canadian dollar's favour. One was a toning down of the trade was rhetoric from Washington. Talk last weekend of tariff on another $200bn of Chinese imports gave way to news that the administration was seeking to restart trade talks with Beijing. The other was oil prices, which pushed higher in expectation of supply disruption as a result of US hurricanes.

Sterling received a boost early in the week when Michel Barnier, the EU's chief negotiator, said a Brexit deal was possible within six to eight weeks.  That prospect was given added plausibility when the European Council scheduled a meeting to discuss Brexit on 13 November.

AUD weekly currency update

The Aussie strengthened slightly against the NZ dollar and added a third of a US cent but that was no great achievement. It lost nearly two cents to sterling and weakened by an average of 0.4% against the other ten most actively-traded currencies. It was mostly a sentiment thing. The Aussie has been heading lower against the US dollar since the end of January and investors have not yet been persuaded that a correction is due. Had its fortunes been decided by the Australian economic data it would have done somewhat better: consumer confidence was a little flaky but the employment figures for August were undeniably strong, with 44k new jobs.

UK ecostats were mostly helpful to the pound, with a narrower trade deficit higher wage increases and an estimated 0.3% growth in July alone. Michel Barnier also helped: the EU negotiator said a Brexit deal was possible within six to eight weeks.

NZD weekly currency update

The Kiwi was unchanged against the US dollar and a touch firmer against the Swiss franc but that gave it nothing to brag about. It weakened by an average of 0.8% against the other ten most actively-traded currencies and lost two and three quarter cents to sterling. The NZ dollar touched its lowest level against the pound since sterling's post-referendum wipe-out. Both of the antipodeans dollars struggled to find support, more as a result of negative sentiment than of any individual shortcomings. NZ manufacturing sales unexpected declined in the second quarter but the purchasing managers' index showed a more vibrant private sector and electronic card retail sales were much stronger than expected in August.

Apart from some useful UK data for trade, earnings and growth the pound's main claim to fame was a comment by EU negotiator Michel Barnier. He said a Brexit deal was achievable in six to eight weeks, and the European Council even scheduled a meeting to discuss it on 13 November. 

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