Category: Money & Finance

Euro Weekly
The big news for the pound this week was the announcement of the Bank of England (BoE) to finally raise interest rates to 0.75%. Prior to the announcement on Thursday, there was little movement in the pound as the markets appeared to be holding their breath and waiting for the arrival of ‘Super Thursday’. After much anticipation, the BoE Monetary Policy Committee (MPC) voted unanimously, 9-0to raise the interest rates for only the second time in a decade, it was announced today. The last increase was in November 2017, when the MPC increased the rate from the record low of 0.25%.The move takes the Bank Rate to its highest level since 2009. Predicted growth for the second quarter is coming in at just 0.4% but solid employment growth, steady pay growth and a rebound in consumer spending proved reason enough to deliver on the much-anticipated increase. In addition, the Purchasing Managers’ Index (PMI) jumped from 53.1 in June to 55.8 in July, the fastest rate of expansion in 14 months. The announcement struck a note of caution, however, suggesting that there unlikely to be further rate rises in the near future. Mark Carney reiterated the risk of Brexit, but while parliament remains on summer break there is unlikely to be any major news to shake the pound on this issue in the near future.
A slowing of growth is emerging in Europe. Eurostat published data which estimated that GDP growth stood at 0.3% in the second quarter, compared with the first. Quarterly growth is holding steady at 0.4% across the European Union but annual GDP growth slowed from 2.4% in the first quarter to 2.2% in the second quarter. These statistics were underscored by European Central Bank president Mario Draghi reiteration of the fact that ECB interest rates will remain at their current low levels “at least through the summer of 2019.”
In the US, Q2 gross domestic product figures showed that the economy expanded by an annualised 4.1%, equivalent to a quarterly 1.0%. This may have been the best performance in four years, but investors were expecting more after a series of bullish briefings and the US dollar lost a third of a cent in the immediate aftermath of the data’s release. The greenback did recover, however, and regained all it had lost by the time the markets had closed. The US Federal Reserve left monetary policy unchanged, but hinted that higher interest rates may be a possibility later in the year. For now, the Fed is maintaining a 1.75% – 2% target range for the federal funds rate. On the global front, President Trump announced his dissatisfaction with the current tariffs on Chinese goods and indicated that they may increase in the near future; the suggestion of further escalation in the trade war may turn out to be bad news for the greenback in the longer term but after the announcement it was flat on the day against sterling but gained a third of a cent to the euro.
The news that Canada had been excluded from trade talks between Mexico and the US meant that the Canadian dollar lost some ground early in the week. Monthly GDP data showed that Canada’s economy expanded 0.5% in May, however, and that helped the Loonie to rebound. Growth in Canada is widespread, with statistics showing positive numbers in 19 of the 20 sectors measured by Statistics Canada. Hints that the trade negotiations between the US and China may be restarted in the near future also gave the Canadian dollar a bit of a boost, although it will take more than a rumour to erase the fear and impact of a full scale trade war.
The Australian dollar edged slightly higher this week after a rebound in Australian building permits and improved local retail sales. The Australian trade surplus rose to $1.9 billion from $725 million and beat the analysts’ estimate of $900 million, but this didn’t appear to help the Aussie. This is largely due to the fact that the surplus was attributed to a contraction in imports, rather than an expansion in exports.
The Reserve Bank of New Zealand took a dovish approach in their policy outlook statement. The shift is reflected in the 30-day bank bill futures and the fact that a rate hike is unlikely any time before the fourth quarter of the year weighed on the Kiwi dollar. Possible escalations in the trade war between the US and China also caused the New Zealand dollar some trouble. New Zealand has an export-led economy and there is concern about the impact of further and higher tariffs in the future.

Edition 31 July – 6 August

Bank of England deputy governor Ben Broadbent spoke earlier this week about the history and future of QE, but offered no clues as to the outcome of the MPC policy meeting next week. Most investors are expecting an increase to 0.75%, but these issues are never certain. Brexit Minister Dominic Raab conceded in a parliamentary committee that PM May is leading the negotiations; investors took this as a sign that a softer Brexit would be more likely. It seems that despite the stories of food stockpiling and other concerns, investors do not subscribe to the no-deal outcome. Their assumption continues to be that Britain will maintain a close economic relationship with Europe after it leaves the EU.
The European Central Bank made the widely anticipated decision to maintain the current interest rates and has also stuck its plan of ending bond purchases by the end of the year. The provisional purchasing managers’ index readings held few surprises; French manufacturing beat forecast at 53.1, services missed at 55.3. Most of the figures across Euroland fell slightlyshort of forecast with the exception of the German number, which was fractionally ahead. A meeting between US President Trump and Jean-Claude Juncker lead to an agreement that the US and the EU will refrain from imposing new tariffs and Europe will buy some of America’s subsidised soya beans.In the longer run, the aim is to work towards a mutual lowering of tariffs on industrial goods – though not on cars. As for whom would best be served by the agreement, investors leaned towards the EU: the euro strengthened by half a cent.
The US dollar fell nearly half a cent early in the week after Donald Trump expressed dissatisfaction with Federal Reserve monetary policy. He told an interviewer that he was “not thrilled” by rising interest rates. The Fed were concerned that the president was attempting to influence policy-making. Trump’s interference might not be as egregious as that of Turkish president Erdogan, yet it was effective: the dollar lost a net two thirds of a cent on Thursday and Friday just as the president might have wanted. The provisional purchasing managers’ index reading came in slightly short of forecast. The big news this week was the announcement of a $12bn support programme for farmers affected by the repercussions of the Trump trade war. The move suggested that the president was digging in for a protracted battle. However, the outcome of the meeting with the EU suggested perhaps it will not be a war fought on all fronts as there seemed to be some agreement to cease the creation of further tariffs.
Australian inflation came in slightly below forecast at 2.1%, with the Reserve Bank of Australia’s bellwether “trimmed mean” on target at 1.9%. New Zealand’s trade figures for June showed an unexpected deficit as exports declined and imports held steady.There was little reaction to the NZ deficit but the Aussie dropped half a cent on the inflation news: investors had evidently been hoping for higher numbers.

edition 29/08/17

Lost god son
A close friend made me godmother to her son when he was born 12 years ago.  I have taken
my responsibility very seriously and have made a point to be in his life.  Since then my friend
and her husband have split up, her husband moved to Australia and my god son went with
him.  I have lost touch with his mother.  I wrote to the boy’s father saying I still wanted to be
in my god son’s life, but he said he wants to cut all ties.  What can I do?
Sadly there is nothing you can do until the boy reaches 16, when you could try and get in
touch then via Facebook.  No doubt he will remember you, but four years for a youngster is
a long time.  I imagine this boy will have other things on his mind when you do get in touch,
so don’t expect for there to be any big reunion.  If the father is preventing all contact, I am
afraid you might have to let this go, and try to move on yourself.
I want to say sorry
I am ashamed to say that when I was at school I was unkind to a girl in my class.  I don’t
know why I did it, but it happened.  Now, years later I think about it and am very
remorseful.  The other day I saw this girl in a supermarket and felt I should have said
something, but I was too nervous and the moment passed.  Then I got an invitation to our
school reunion, so I am wondering if I should go and apologise.
If you definitely know this girl is going to the school reunion, then I would go and tell her
you are sorry.  If you are able to contact her beforehand I would do this, as she may not
want to go to the reunion because of her bullying experience.  Try and get in touch with the
organisers and see if you can get in contact with her via that route first.  We all do stupid
things when we are young, and then live to regret it.  You will be doing the right thing.

Euro – weekly update

EUR weekly update
Most of the economic data from Euroland either beat forecast, were an improvement on the previous month or both. Among the provisional purchasing managers’ index readings, which measure the vigour of the private sector, only French manufacturers reported any slowdown in growth. Germany’s economy expanded by 0.4% in the fourth quarter of last year, less than Britain’s upwardly-revised 0.7% but enough to make it the class leader for calendar 2016.
Investors struggled to find inspiration among the few US economic statistics. Provisional purchasing managers’ index readings came in below forecast and lower on the month. Existing home sales were reasonably strong but jobless claims increased by more than expected. It was left to the Federal Reserve to provide the guidance that was lacking elsewhere.
Whilst a handful of senior Fed people stoked the anticipation of three interest rate increases this year the minutes of the last policy meeting were characteristically non-committal about when the process might begin. It was not enough to bring in new dollar buyers: the Greenback lost a cent to the euro and half a cent to the pound.
Sterling had an eventful week, trailing the other major currencies on two days and leading them on three. The overall result was a weekly win for the pound, which added a net one and a half euro cents. The euro, meanwhile struggled at the back of the field accompanied by its boon companion, the Swiss franc. It lost one US cent despite all the positive ecostats, principally because of strong opinion poll showings by anti-euro candidates in Holland and France.

The Euro Update

Brought to you by Moneycorp

The initial effect of Donald Trump’s election to the White House seems to have run its course.  While investors still expect his policies for tax cuts and infrastructure spending to be positive for the dollar in the longer run they were not sufficiently enthusiastic to continue buying the dollar a month after the vote.  Despite the looming uncertainty of this weekend’s referendum in Italy and presidential vote in Austria they still preferred the euro to the dollar: it strengthened by one US cent on the week.
Sterling did better than either of them, strengthening by one and three quarter US cents and touching a four-week high.   Although the spectre of Brexit still stalks the pound investors are no longer so frightened of Britain falling off an economic cliff edge when the spilt finally happens.  The Bank of England governor and the minister of Brexit both floated ideas to avoid that risk.
On the whole it was a better-than-average week for the euro, which strengthened by a cent against the US dollar and added half a Swiss cent.  Economic data from Euroland were few and far between and those which did appear were unremarkable.  The EU’s confidence measures fell short of expectations but investors ignored them as usual.  Inflation was on target at a provisional 0.6% while unemployment ticked down to 9.8%.  Sterling had an eventful week, more than once lurching higher or lower for no apparent reason and eventually gaining a third of a euro cent.
The coming weekend brings a constitutional referendum in Italy and a presidential election in Austria.  Italians are expected to reject Prime Minister Renzi’s proposals for constitutional reform and Austria could quite well send the far-right Freedom Party candidate to the Hofburg Palace.  Should they occur, both of those results would be likely to undermine appetite for the euro.