Moneycorp Currency Round Up
EUR weekly currency update
For a second week the British pound shared the tail-end slot with the US dollar. Having lost an average of -0.9% the previous week they are down by -1.4% over the last seven days, sterling with a loss of two euro cents. Its problems were a mix of economic and political issues. Inflation slowed unexpectedly to 2.6%, reducing the theoretical upward pressure on interest rates, and the second round of Brexit talks in Brussels apparently got off to a difficult start.
The euro's principal advantage was Mari Draghi, the president of the European Central Bank. Following Thursday's Governing Council meeting Sig. Draghi told journalists that discussions about a wind-down of the asset purchase programme "should take place in the autumn". Despite choosing his words as carefully as he could, and even though nobody was surprised at the news, Sig. Draghi's comment sent the euro more than a cent higher.
USD weekly currency update
It was a case of "as you were" for the dollar and the pound. They again shared last place among the major currencies, falling by an average of -1.4% after declining by -0.9% the previous week. The dollar was down by two and a quarter cents against the euro.
In both cases a mixture of political and economic news contributed to the two currencies' downfall. With sterling investors taking a negative view of the Brexit talks in Brussels, which appeared to be stumbling already over the future rights of EU and UK citizens to move freely across Europe. They were also less than enthusiastic about a slowdown in inflation to 2.6% which, they assumed, would lessen any upward pressure on interest rates. Investors had similar thoughts about a dip in US inflation to 1.6% and they continued to worry that "the Russia thing" is distracting the administration from its proper tasks.
CAD weekly currency update
After doing well the previous week the Loonie was one of the weaker performers over the last seven days, falling by an average of -0.4% against the other dozen most actively-traded currencies. It did well against the US dollar and the British pound though, simply because those two were at the rear of the field for a second week, held back by political and economic concerns. The White House's ongoing "Russia thing" and an apparent stumbling leading up to the Brexit negotiations were the political negatives: the economic ones were inflation, which came in lower than expected for both Britain and the States.
The sole Canadian economic indicator was manufacturing shipments, which were up by 1.1% for a second month. The statistic almost never attracts attention but this time it did, perhaps because there was nothing else at the time for investors to look at. It was worth quarter of a cent to the Loonie.
AUD weekly currency update
Except for the Norwegian krone, which was helped into first place by rising oil prices, the Australian dollar and the euro were the top performers among the major currencies. They strengthened by 1.8% against the US dollar and the British pound, which shared last place for a second week. The Aussie went up by three cents against sterling.
A decent set of Australian employment data did not help as much as it might have done, but the minutes of June's Reserve Bank of Australia board meeting more than made up for it. Investors seized upon a comment about "a new neutral real interest rate" two percentage points above current levels. An RBA deputy governor tried on Friday morning to persuade the market that it had given undue importance to the remark, and that it did not constitute a commitment to higher rates, but investors were not entirely convinced.
NZD weekly currency update
The NZ dollar was unchanged, on average, against the other dozen most actively-traded currencies. It strengthened by 1.4% against the US dollar and the British pound, which shared the wooden spoon for a second successive week. The Kiwi added two and a quarter cents against sterling. On Tuesday morning it had looked as though it would have a difficult week after second quarter NZ inflation came in lower than expected at 1.7%. However, unhelpful political and economic news from Britain and the States allowed it to regain its footing and move ahead.
For sterling the political problem was the Brexit negotiations, which appeared to be stumbling over the matter of freedom of movement for EU and UK citizens. For the Greenback it was the "Russia thing", which is seen to be distracting the administration from its legislative agenda. For both currencies slowing inflation meant less upward pressure on interest rates.
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