EUR weekly currency update
It was a good week for the euro, which strengthened by half a cent against the pound and the US dollar, leading the field among major currencies.
The euro’s week didn’t get off to a particularly good start. Investors were not entirely convinced by the decision of Euroland finance ministers to extend by two years the target for Greece’s full implementation of the austerity measures that are supposed to bring down the country’s fiscal deficit. They might have been more impressed had the EU not withheld the next tranche of bailout money because of a dispute with the International Monetary Fund.
But by Tuesday morning investors had persuaded themselves, as they always seem to manage to do, that the Greek can had been kicked sufficiently far down the street. The problem might reappear – indeed probably will reappear – next month or next year but for now the single currency is alright.
USD weekly currency update
The dollar and the pound were level pegging during the entire week with sterling covering a range of no more than one cent. When London opened Monday morning they were unchanged on the week.
During the first four days the dollar looked good. Investors concerned about the dreaded “fiscal cliff” wanted safety and they found it in the dollar. As the week drew on, however, the story from Washington became less dire. Politicians were talking to one another in a conciliatory way. There whiff of settlement in the air made investors less nervous.
At the weekend, following a discussion of the matter with the president and congressional leaders, Treasury Secretary Tim Geithner said “It was a good meeting and the tone was very good.” A compromise deal “is within our grasp, within our reach”. If so it will be one less thing for investors to fret about and one less reason for buying the dollar.
CAD weekly currency update
The Canadian dollar almost exactly tracked the US dollar and the pound stayed in close touch with both of them. When London opened for business Monday morning the result was a GBP/CAD exchange rate virtually unchanged on the week.
Other than the generally quiet market conditions, the main reason for the Loonie’s lack of initiative was the shortage of tradable economic data. Manufacturing shipments (production) grew by a worthwhile 0.4% in October but the figure was almost exactly what investors had been expecting so it created no positive waves. Canadian international investment flows continued to show an influx of money: foreigners bought $14bn of Canadian securities in September while Canadians bought $6bn of foreign assets.
There are only two sets of data on this week’s agenda as well but they are important ones; retail sales and inflation.
AUD weekly currency update
The Australian dollar weakened by nearly a cent over the seven days. It was saved from any more extensive damage by a rally late on Friday and over the weekend.
For most of the week the antipodean dollars were on the unwanted list because investors were worried about southern Euroland, the American “fiscal cliff” or both. Once those worries started to fade, as more optimistic stories were heard from Brussels and Washington, investors’ appetite for the Australian dollar began to return.
The Australian economic data were mostly low-profile. Mortgage lending was up by a monthly 0.9%. Business confidence was weaker while consumer confidence improved.
This week’s highlight will be the minutes of the Reserve Bank of Australia board meeting at which the directors surprised financial markets when they decided not to lower the Cash Rate. Investors will be dying to find out why, and to see whether or not a cut is still in the pipeline.
NZD weekly currency update
In a generally thin market the GBP/NZD exchange rate saw plenty of movement but little purpose and less than a cent of net change. It covered a range of just over three cents.
For most of the week the antipodean dollars were on the unwanted list because investors were worried about southern Euroland, the American “fiscal cliff” or both. Once those worries started to fade, as more optimistic stories were heard from Brussels and Washington, investors’ appetite for the New Zealand dollar began to return.
And the Kiwi did need the boost. Of the week’s two important sets of economic data one, the Business NZ purchasing managers’ index, had registered a useful two-point rise to 50.5, swinging from contraction to growth. However, the -0.4% quarterly fall in retail sales was a big disappointment to investors who had been expecting sales to rise by at least that proportion.