Weekly Brief

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Weekly Brief - 28th December 2018

EUR weekly currency update

The Japanese yen, the Swiss franc and the euro, in that order, were the week's top performers. The euro added two thirds of a US cent and went up by three fifths of a cent against sterling. Euroland economic data did not really come into the reckoning. German consumer confidence is unchanged at 10.4 for January, according to Gfk, and the European Commission said confidence for the euro zone as a whole softened to a provisional -6.2.

The prime mover for the euro was volatility in equity prices and the White House and the effect they had on the US dollar. A partial government shut-down and concerns about the security of the Fed chairman's position competed for attention with big swings in US share prices to send the US dollar, and therefore the euro, hither and yon in a seasonally thin market.

 

GBP weekly currency update

The week's UK economic data all came out in a rush last Friday. This certainly did no harm to sterling, which was firmer on most fronts after the figures' release. Gross domestic product was confirmed to have expanded by 0.6% in the third quarter and business investment went down, as expected, but the quarterly 1.1% decline was less than analysts had predicted. Public sector net borrowing for November was also lower than forecast.

With the Westminster Brexit machine on its Christmas holidays sterling enjoyed an unusually low profile. Investors were far more interested in the US government shutdown, the future of the Fed chairman and the gyrations of equity prices. Sterling was eventually unchanged against the US dollar and it lost two thirds of a euro cent.

 

USD weekly currency update

There was no shortage of economic data from the States. Last Friday's figures showed the economy growing fractionally less swiftly than previously suggested, at an annualised rate of 3.4% in the third quarter. Durable goods orders increased by 0.8% in November rather than the 1.6% that analysts had forecast. The Michigan consumer confidence index a point higher at 98.3. The Kansas Fed's manufacturing activity measure slumped 42 points to -18 and the equivalent figure from the Richmond Fed was down by 22 points at -8.

The data were not especially helpful to the dollar and neither were the politics. On Friday the government went into partial shut-down because the president refused to approve the budget. The following day it emerged that Trump wanted to fire the Federal Reserve chairman. Such things did not endear investors to the dollar. It was flat against sterling and two thirds of a cent lower against the euro.

 

CAD weekly currency update

The three Canadian statistics of the week appeared last Friday and they failed to float the Loonie's boat. A 0.3% expansion for gross domestic product in October was decent enough, beating the 0.2% forecast by analysts, but the retail sales numbers on the same month were disappointing. Sales were up by 0.3% on the month, less than expected, and excluding autos (cars and light trucks) they were flat. The Canadian dollar needed more than that if it was to make any headway.

Once again, the main stumbling block for the Canadian dollar was struggling oil prices, which touched an 18-month low despite the apparent efforts of OPEC to limit production. The ructions in Washington did not help either, with a partial government shutdown and a story that the president was making enquiries about firing the Federal Reserve chairman. The Loonie lost one US cent and went down by two and a quarter cents against sterling.

 

AUD weekly currency update

The Aussie and Kiwi were the week's biggest losers while the safe-haven Japanese yen and Swiss franc took first and third place. For the Australian dollar, it meant a loss of one and a half US cents and a decline of three and three quarter cents against sterling. There were no Australian economic data to make any positive case for the Aussie and it was left to do what it could for itself amid volatile global equity markets and dysfunction in Washington.

It was not that the Aussie did anything wrong: the antipodean dollars did almost equally badly and the Canadian dollar was not far ahead of them.  Investors simply did not want to take extra risk onboard as they saw a partial shutdown of the US government  and a US president trying - and failing -  to fire his central bank chairman.

 

NZD weekly currency update

Among the commodity-oriented currencies, the NZ dollar was the weakest performer, losing nearly four and a half cents to sterling and one and a half US cents. Its main problem was risk-aversion among investors, who preferred the security of the yen, the Swiss franc or the euro. Much of that unease stemmed from the White House in Washington, where the president was in open battle with Congress and at the same time seeking ways to fire the Federal Reserve chairman.  Investors could see no upside there for world trade and, anyway, they were stressed at the way global share prices were flying around.

There were no NZ economic data to sweeten the pill for the Kiwi.  In the year to date, however, the NZ dollar has strengthened by 1.5% against sterling and by 4.8% against the Aussie. 

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