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Sterling drops the pack

USD: It was déjà vu all over again for the dollar. The USD did move, but then it moved back. This morning it was within ten ticks of its positions 24 hours earlier against the EUR, the CAD and the JPY. The four were practically unchanged against one another. Any twitches along the way owed more to verbal than statistical activity: the only ecostat of any consequence was a one-point fall in the NFIB index of small business confidence that still left it at its third highest level in the survey's 45-year history. The US president got a couple name checks - he complained again about rising interest rates and the IMF said his trade war was partly to blame for a slowdown in global growth - but neither came as a surprise to investors.

EUR: Although Italy represents only about 15% of the euro zone economy, continuing worries about the Italian government's fiscal policy are a headache for the euro. The story is the same as it has been since September: the odd-ball coalition of right-wing Liga and populist Five Star is trying to be all things to all men, cutting taxes and increasing expenditure, and everybody from the European Commission to the smallest international investor is concerned that government spending could go off the rails. The last thing Europe needs is another debt crisis but the Italian government is either blind to the risk or trying to buy short-term electoral advantage with long-term debt.

CAD: Canada had an economic statistic on show: housing starts hit a 19-month low in September following declines in  four of the last five months.  Investors were totally unconcerned though. The Canada Mortgage and Housing Corporation, which produces the figure, simply noted that construction had moved closer to its long-run average after "elevated levels" last year.  The Loonie actually moved higher following the news.

GBP: Brexit was the main driver for the British pound. For the umpteenth time this year investors decided that a UK-EU agreement was just around the corner and the GBP took the lead among the major currencies, adding one US cent to leave the USD 0.7% lower on the day. Nothing actually happened on the Brexit front but there were apparently encouraging noises from Brussels. In Westminster the situation was as chaotic as ever; the prime minister came under renewed attack from her own Conservative party while finding new support among the Labour opposition. Disappointing UK production and trade data this morning put only a temporary dent in the GBP.  

JPY: Investor demand for a safe haven evaporated, leaving the JPY to behave as a normal currency. Figures released overnight showed machinery orders rising strongly in August - they were up by a monthly 6.8% - but the JPY was unaffected. With the yen at the moment demand is binary.  Investors either need a safe haven or they don't. The ecostats have little effect because they are seen to have no immediate influence on Bank of Japan policy.

USD mostly unchanged again

USD mostly unchanged again

EUR carries the can for Italian debt

EUR carries the can for Italian debt

CAD ignores slowing housing starts

CAD ignores slowing housing starts

GBP fired up by Brexit expectations

GBP fired up by Brexit expectations

JPY flat as safe-haven demand fades

JPY flat as safe-haven demand fades

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