Euro Stagnation Concerning Currency Markets

17 October, 2014

Simon Eastman

Thursday was looking like another day where sterling could come under fire with a lack of any economic data due out, but with the poor retail sales from the US on Wednesday hurting the dollar, it was the euro which could have been the main beneficiary.

The day started with European stats, with Italian trade balance for August which showed a significant drop from €3.4 Billion in July to just €0.33 Billion for last month. Swiftly behind came EU inflationary stats, which although they came out as forecast the fact that it stayed a 0.3 percent as it was last month gave rose to investor concerns over the single currency area.  

Stagnant growth, low inflation, budget issues in France and Italy, political concerns in Greece and the recent poor run of stats form Germany are making investors nervous that the EU may be slipping back into the woes from last year and the recent monetary policy introduced by the ECB is not having the desired effect to help stimulate growth.

After lunch the flurry of US data had little effect with a mix of low key releases and a mixed bag of hitting and missing expectations. The initial jobless claims came out better than expected, with 264,000 signing on rather than the expected 290,000 but the continuing jobless claims was worse than expected, showing more are losing their jobs and more are not finding work, not a good sign for a recovering economy. Industrial production came above forecast as did a Philadelphia manufacturing survey but despite this the US dollar stayed on the back foot against sterling and lost the ground it made against the euro over the course of the afternoon, having initially gained nearly a cent.

Overall it was sterling, despite the lack of data who won the day, taking a cent off the US dollar and similar against the euro, while managing nearly 2 cents against the Aussie. But dont be fooled, it was down to other currencies weakness rather than pound strength.

The week comes to a close with another quiet day for stats, with just construction output for the EU and housing starts and building permit stats for the US alongside a speech by Fed governor Janet Yellen and the key consumer sentiment index just before 3pm BST. The other key data comes from Canada where they release inflation figures coming out just after lunch at 1.30pm BST. So anyone looking to send money to Canada or the US make sure to stay in touch with your CI broker throughout the day as volatility is likely.