Anything but Europe

3 minute read


The dollar was up there with the leaders on Monday.  And a motley bunch they were too; tagging along with the USD were the CHF, JPY, CAD and ZAR, so it was not just a matter of investors seeking a safe haven. What they did have in common, though, was a lack of involvement with the EUR and GBP.  As much as anything, investors were moving into the USD because of what it wasn't, not what it was. It strengthened by 0.3% against the EUR and 0.4% against the GBP. Other then the Chicago Fed's National Activity Index, which slid from 0.27 to 0.17, there were no US ecostats for investors to play with.


In Euroland it was more of the same: investors take a dim view of the way Italian lawmakers are behaving as if  money was no object. They were initially optimistic on Monday morning that the EU was not about to go into battle with Rome regarding its plan to run a 2.4% deficit next year.  Also, the Moody's rating downgrade delivered Friday was apparently not a portent of more cuts in the pipeline. But then Italy declared itself ready to face down any EU objections to its budget. The EUR went into  retreat.


The Loonie only had one economic statistic to contend with and it was not very good. Expectations had been low for August's wholesale sales - they were forecast to be flat on the month. However, they turned out to be down by 0.1% and the previous month's increase was downwardly revised from 1.5% to 1.1%. But never mind: Toronto is a long way from Europe and a rate increase is expected tomorrow from the Bank of Canada. So the CAD was let off the hook and it was just about unchanged on the day against the USD.


More of the same in Euroland was matched by more of the same in Britain.  After a few days' reprieve Brexit began once again to bite at the GBP's heels. On this occasion the problem was the prime minister's coalition partner, Northern Ireland's tiny Democratic Unionist Party, threatening to vote against the government's divorce plan. Whether or not it actually does so is beside the point; the simple threat was another unwelcome reminder that the whole Brexit fiasco is built on shifting sand and that something else could go wrong at any minute.


The yen was the best of the bunch, Japan being further removed from Europe than any of the other contenders. Until London opened this morning it was fractionally ahead of the USD but the gap was not wide.  When European investors got hold of it, however, they decided that safety was the word of the day.  Switzerland's franc was okay but Japan's yen was better.  The JPY moved higher in the early London session, taking it 0.5% ahead of the USD.

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