Weekly brief

Weekly brief

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Currency update

USD: Another good day for US equities, another bad one for the US dollar.  Predictably, the economic data had little bearing on the situation. Jobless claims and existing home sales were unremarkable. The Philadelphia Fed's manufacturing index almost doubled, to 22.9, but the rise merely returned it to the trend level of the last year. Investors could see no reason to buy the dollar: If anything, they could find arguments to stay away among the tariffs, tax cuts and deficits. There was also a reminder from Norway's central bank that it is not only US interest rates that have an upward tilt.

EUR: Provisional data from the European Commission showed consumer confidence in the euro zone deteriorating from -1.9 to -2.9 in September.  And that was it. The sole Euroland ecostat. The euro was drifting lower ahead of the news and it continued lower for another two hours before rebounding. In the absence of hard Euroland economic data, the focus of investors was on the EU leaders' summit meeting in Salzburg, not because of its potential impact on the EUR but because they were amused by the embarrassment of the British prime minister. The EUR added one US cent on the day.

CAD: It was back to normal for the Loonie as it fell into step with the USD once again. There were no Canadian economic data to distinguish or embarrass it and no signs of progress in the NAFTA negotiations, where another deadline came and went. Talks will reconvene next Wednesday, five days ahead of the October 1 deadline (this time it's serious) set by the US administration. The CAD did not get the help from oil prices that it had received in the previous few days: WTI was down by 1% on the day. The CAD and USD were unchanged against one another.

GBP: Ahead of New York's opening the GBP was doing well. Thereafter it struggled, though it was still able to take a cent and a quarter off the wallowing USD. The early good news came from Britain's Office of National Statistics. UK retail sales went up by 0.3% in August. The result was much better than the forecast 0.2% decline and GBP moved ahead. It later came undone when EU leaders rubbished Theresa May's proposal for a post-Brexit deal. The internal Irish border continues to be the main sticking point and it is difficult to see how the differences can be reconciled.  

JPY: The yen has been the back marker on four of the last six trading days and that was where it found itself on Thursday. It has also been the weakest performer over the last week and month, falling by 0.8% and 2.4% respectively against the USD. Japan is almost alone among the major economies in having interest rates that look likely to remain nailed to the floor for the rest of time. The re-election of Shinzo Abe as leader of the LDP did nothing to alter that outlook.

USD still failing to attract buyers

USD still failing to attract buyers

EUR sidelined as investors focus on Salzburg

EUR sidelined as investors focus on Salzburg

CAD loses its oil price crutch

CAD loses its oil price crutch

GBP higher on UK retail sales data

GBP higher on UK retail sales data

JPY at the back of the fleet again

JPY at the back of the fleet again

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