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Easing tensions leave USD and JPY lower

USD

Greater optimism on all fronts led to reduced appetite for the USD, which continues to be seen as a safe haven, even when investors' concern centres on the United States. The USD did well when it was all about trade wars and government shutdowns. At the end of last week, as those fears faded, the dollar was not as wanted. Trump signed the budget to avoid another shutdown and both sides agreed that the trade talks with China were going well.

The US economic statistics were mixed. Industrial production fell 0.6% in January and capacity utilisation slipped to 78.2%. Balancing those, the New York Fed's manufacturing index improved by five points to 8.8 and the provisional Michigan consumer sentiment index beat forecast by two and a half points at 95.5.

EUR

There was nothing new from Euroland statisticians during the New York session on Friday or this morning. The main focus for the EUR was speeches by the European Central Bank's Benoît Cœuré and Francois Villeroy de Galhau. Both said in their different ways that the slowdown in Europe is "significant". M. Villeroy said it could mean a change of guidance on monetary policy: M. Cœuré went one further and posited a resumption of targeted longer-term refinancing operations (TeLTROs).  

Talk of renewed policy easing held back the EUR. It strengthened by 0.3% against the softer USD but without the introduction of stimulus to the debate it could have done better.

CAD

Optimism regarding the Sino-US trade negotiations was helpful to the commodity-related currencies. The CAD did not do as well as its Australian and NZ cousins but it still managed to pick up 0.3% against the USD.

A 2.3% rise in the price of WTI crude was also positive for the CAD. The only Canadian economic data were the numbers for incoming and outgoing portfolio investment. Canadian investment in foreign securities declined by $430 million while foreign investment in Canada was down by a much larger $18.96 billion.

GBP

Sterling was Friday's top performer. It eventually received a good deal of help from the strong UK retail sales data for January. There had been no immediately strong reaction to the data: it was not until hours later that the GBP really got moving. It is up by 0.8% on the day.

There was a new development in the Brexit shambles this morning when seven members of parliament left the opposition Labour party to sit as The Independent Group. Their resignation was prompted by Labour leader Jeremy Corbyn's woolly positions on antisemitism and Brexit. The seven have issued an open invitation to MPs from all parties to join them. The initial reaction of sterling was positive.

JPY

Like the USD, the JPY lost some of its allure as the shutdown was averted and the trade talks were said to be making progress. The yen took more of a hit than the dollar though, because its unique selling proposition is its safe-haven credentials. It is only down by 0.1% but that is enough to qualify it as the day's weakest performer among the majors.

The only ecostats of any consequence today - from anywhere - were the numbers for Japanese machinery orders. They were down by 0.1% in December and 0.9% below the same month in 2017.

USD mostly lower as political and trade tension ease

USD mostly lower as political and trade tension ease

EUR held back by talk of renewed monetary stimulus

EUR held back by talk of renewed monetary stimulus

CAD benefits from Sino-US trade optimism

CAD benefits from Sino-US trade optimism

GBP leads eventually, following sales data

GBP leads eventually, following sales data

JPY at the back of the field as investors shun safe-havens

JPY at the back of the field as investors shun safe-havens

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