Category: Money & Finance

Euro Weekly
GBP: Last week, Mark Carney met with concerns over post-Brexit monetary policy; the Bank of England stated that it is not a given that a no-deal Brexit would lead to lower interest rates. The market does assume that an orderly Brexit would mean a faster pace of rate increases, and positive sentiment on Brexit appeared to be the tone for this week. The sterling-positive rate story was balanced by the negative news that Downing Street had not, after all, secured an arrangement for UK banks to operate in Europe and a Brexit deal will not be finalised within three weeks. However, the mood had been set and the market seized on a story in The Times that a Brexit deal is imminent. Also, again, the prime minister’s office played down the idea, calling it “speculation” but investors have begun to believe that there must be something to these stories and that Theresa May is preparing to force a compromise upon her recalcitrant Brexiteers. There was little in the ecostats to support this; Britain’s construction sector also came in higher than expected but the services sector purchasing managers’ index fell from 53.9 to 52.2, missing forecast by more than a full point and touching its lowest level since immediately after the Brexit referendum. Yet sterling hesitated only briefly before zig-zagging to a four-week high against the euro. All eyes were on Brexit as the PM held a cabinet meeting sharing the details of the proposed Brexit deal which came with the caveat that the deal was 95% complete and the Irish border remains a sticking point that no amount of optimism can surmount.
EUR: The euro has had less of a positive week and declined against a basket of currencies towards the end of the week. The European Commission is warning of weakening global economic activity, growing trade tensions, slower employment growth and increased uncertainty over investment could slowdown economic growth in the euro area in the coming two years. In addition, this issue of Italy’s budget and the EU fiscal rules is coming to a head. There is some hope that the difficulties might lead to a more durable approach to EU fiscal policy but in the meantime, the matter continues to harry the euro.
USD: It was a big week for the US dollar. At the end of last week, the US dollar was the top performer due to positive employment data. Not only were a quarter of a million jobs added in October, wages growth accelerated from 2.8% to 3.1% a year. This is the biggest annual gain in more than nine years. The major factor this week was the US midterms. The dollar fell after the Democrats took the majority in the House of Representatives; this is due to the fact that the opposition now has the opportunity to frustrate the president’s policies and it gives more teeth to the investigation into collusion and the potential for impeachment if any wrong-doing is uncovered. The result had been largely priced in, but it’s clear that a change is coming in US politics and the market reacted to the uncertainty. There were no meaningful US economic data to shade the debate and the president said nothing to make investors worry. He did sack his attorney general and he withdrew the White House pass of a journalist who asked difficult questions but investors saw that as just another day at the office. Towards the end of the week, the Federal Reserve opted not to change interest rates Thursday but hinted that rates are likely to rise on 19th December and that there would be three more increases next year.
CAD: Oil prices rose amid reports that Russia and Saudi Arabia had begun discussions over possible curbs to oil production in 2019 and this assisted the Canadian dollar briefly. However, this didn’t last long and the loonie weakened to an eight-week low against its broadly stronger US counterpart on after oil prices recovered and the Federal Reserve left intact its plans to gradually raise interest rates.

Euro Weekly

The pound has found perhaps an unlikely ally in EU negotiator Michel Barnier. His optimism about the possibility of reaching a deal and positive outlook on plans coming from the UK helped to give sterling a boost at the beginning of the week. In contrast, the pound had little response to the slew of ecostats released this week. GDP beat forecast with a provisional 0.3% expansion in that single month and growth of 0.6% in the three months to July. Manufacturing output was down by 0.2% in July with the broader industrial production increasing by just 0.1%. The annual changes were 1.1% and 0.9% respectively. Jobseeker numbers increased by fewer than forecast and the rate of unemployment was unchanged and on target at 4.0%. Earnings both with and without bonuses increased by more than analysts had predicted: including bonuses they were up by an annual 2.6% while basic pay rose by 2.9%. Yet sterling was a net loser on the day, falling by an average of 0.3% against the other ten most actively-traded currencies. There was a better news coming from the Bank of England, including Mark Carney’s confirmation that he would stay on until January 2020 to provide stability during the Brexit process. The BoE’s Monetary Policy Committee voted to hold firm with interest rates on at 0.75% but raised its growth forecast to 0.5% for the third-quarter, up from 0.4%. This gave the pound a slight boost, although as with the BoE forecast, it was tempered by the shadow cast by the uncertainty of Brexit.
The ECB also announced their interest rates this week and kept the main rate at 0% as expected. However, the accompanying speech suggests that the euro will not be content waiting in the wings. Jean-Claude Juncker has called on the European Union to champion the euro as a global currency to rival the dollar and demanded more powers for Brussels to flex its muscles on the world stage.
American nonfarm payrolls went up by a provisional 201k in August, about 10k more than analysts had predicted, but the increase was neutralised by a 10k downward revision to the previous month’s figure. The other good-news-bad-news trade-off was the 2.9% annual increase in average US hourly earnings: it was of little value in an environment of 2.9% inflation. Regarding the US producer price index data, the core index – excluding food and energy prices – went down by 0.1% in August. It has logged similar declines in recent years but this time investors did not like it. The greenback not only lost ground to the euro and the pound, but even struggled against the Turkish lira and the Mexican peso. The matter of trade is also weighing on the US dollar. When it emerged that senior US administration officials had invited their opposite numbers in Beijing to another round of talks, the dollar took a couple of steps to the rear. Overall the dollar was down by an average of 0.6% against the other ten most actively traded currencies at the news.
The Canadian dollar has been having a difficult time and the employment figures were not helpful to the Loonie: unemployment rose to 6.0% with the loss of 52k jobs. There was better news later in the week when the price of oil went up by 3.4%. As an oil producer, this created some optimism for Canada’s currency but not a direct correlation because the Canadian dollar’s biggest upward move came six hours after oil took off. The likelihood is that the Loonie also gained some traction from optimism about a NAFTA deal.
Overnight Westpac’s index of Australian consumer confidence fell three points to 100.5. However, the Sino-US trade talks story that hurt the US dollar was positive for the Australian one. The Aussie received further help from the employment data, this week. Expectations today were for 15k new jobs. When 44k were delivered, the majority of them full-time positions, investors just had to mark the Aussie higher. After the news, it strengthened by an average of 0.6%, taking more than a cent and a half off sterling.
The recently struggling New Zealand dollar was also heading for a 0.8 per cent weekly gain after markets were cheered by news that the US and China may return to the negotiating table. The tensions have been weighing on the kiwi and the possibility of an end to the impasse was good news down under. Next week sees the release of the second quarter gross domestic product data; if this is stronger than the central bank anticipates, it may help the kiwi.

Euro Weekly Update

Despite some major stats on the UK economic picture being released this week, it was once again Brexit that caused the most movement in the pound. The UK’s economic growth held steady at 0.4% and indicated the possibility of a faster pace of growth towards the end of the year. However, a breakdown of the stats showed that the picture isn’t rosy everywhere. Activity in the UK’s services sector rose in August to 54.3 from 53.5 according to survey by HIS Markit and the Chartered Institute of Procurement and Supply but this was the one spot of good news, albeit significant given the prominence of the service sector in the UK economy. Growth in the UK construction sector slowed to 52.9 in August while manufacturing eased to 52.8. None of this had little impact on the pound, which remains more vulnerable to the slings and arrows of Brexit negotiations. Michel Barnier proposed a backstop that would mean NI staying in the EU customs unions, large parts of the single market and the EU VAT system but this was rejected by the UK government. In news that was more positive for the pound, Germany are said to be ready to accept a less detailed agreement on the UK’s future economic and trade ties with the EU in a bid to get a Brexit deal done. The only other element influencing the pound this week was the variety of news from the Bank of England, sending the pound both up and down as sentiment dictated. Inflation reports from the BoE shook GBP markets, but Mark Carney’s hints that he may extend his tenure to provide some continuity throughout Brexit were taken as a positive.
It was mostly quiet on the euro front, but the currency was slightly weighed down by indications that Euro zone economic growth will be modest at best over the coming year, according to a Reuters poll of economists who unanimously said the trade war between the United States and China threatens the outlook. The forecast looks steady at 0.4% every quarter through to the end of 2019 according to the poll, but there are some suggestions that growth is losing momentum and could be further impacted if a trade war between the United States and China escalates further, hurting business and consumer sentiment and keeping financial markets on edge.
The dollar consolidated near a one-week high against a basket of currencies on Monday as tensions around global trade and a continued selloff in emerging markets fuelled demand for the greenback. However, it may be that at some point that the fallout from the turbulent presidency of Donald Trump has an impact on the dollar, with criminal proceedings and investigations into key figures in the Trump camp ongoing and the US Mid-Terms looming, which could see the Republicans lose control of Congress and provide a very different political landscape going forward.
After some tough weeks, the Canadian dollar strengthened against the greenback towards the end of the week. The Bank of Canada left its policy rate on hold at 1.5% and left the Loonie at seven-week lows but recovered after a senior Bank of Canada official said the central bank had discussed the pace at which it could raise interest rates. Senior Deputy Governor Carolyn Wilkins pointed to some possible hope on the horizon after confirming that there has been discussion of whether the Bank’s gradual approach to raising rates remains appropriate.
The Australian dollar recently fell to a 27-month low against the US dollar this week after the decision by the Reserve Bank to maintain the current interest rate. Coupled with political uncertainty, a slowing of jobs and growth and the looming impact of the US/China trade war, the Aussie is also struggling against sterling. The kiwi dollar appears to be also caught up in the mix as the pound surges ahead on a wave of positive Brexit rhetoric.

Euro Weekly
The huge losses felt by the Turkish lira at the back end of last week gave sterling some much needed
respite. Trump’s punitive tariffs caused a knock on effect of weakening the euro, to the benefit of
the pound. In general the pound remains weighed down by Brexit speculation and even the release
of generally solid figures this week did little to help it. Tuesday's employment data showed that
unemployment fell to a 40-odd-year low at 4.0% but earnings growth stagnated. The Consumer Price
Index show that the rate of inflation ticked up to 2.5%, exactly in line with the consensus forecast.
Core CPI was also uncontroversial; unchanged at 1.9%. But the Retail Price Index, which includes
housing costs, went up by only 3.2%, having been expected to remain steady at 3.4%. Retail sales
have been more than little erratic this year. Cold weather, hot weather and sporting events have all
had an effect. The ONS reported sales rose by 0.7% in July after June's 0.5% fall.
Concern that there will be knock on effects on the US-Turkey tariffs across Europe weighed on the
Euro this week. Spain, Italy, France and Holland are thought to be large lenders to Turkey and this
caused some concern. However, the euro emerged from the week largely unscathed and there was
little data to cause problems. Italian inflation was steady at 1.5% and Eurozone growth was revised
up to 0.4% for the second quarter, eliminating any possible advantage from the UK.
The US dollar is making gains thanks to President Trump’s trade war continued growth in the US
economy. However, there are still questions about the inherent strength of the greenback with most
of the gains due to the severe losses of the Turkish Lira and the potential consequences for the euro
too. The Lira has weakened dramatically in the last year, with the exchange rate versus the USD up
to 7.2 this morning, 112% higher than the 12 month low of 3.4. July's US retail sales data were all
better than expected. Overall sales were up by a monthly 0.5% and excluding cars they rose by 0.6%.
The Control Group, an important component of the Personal Consumption Expenditure measure so
beloved of the Federal Reserve's policy-setters, rebounded by 0.5% after falling 0.1% in June. Good
numbers then, but they are not likely to accelerate the pace of Fed rate increases.
The Canadian dollar this week faced the consequences of falling prices for oil and equities. The US
dollar reaching a 13-month high certainly didn’t help and midweek the Loonie registered losses
against the dollar and sterling.
Down under, the Australian dollar was assisted by employment figures. In contrast to the scepticism
over UK numbers due to the high numbers of people in part-time, freelance and zero-hours
contracts, the fact that there was a net loss of 3,900 jobs in July was less significant than the major
swing from part-time to full-time working. Overall, unemployment fell to 5.3%, a six-year low and as
the new broke, the Aussie strengthened by more than a cent against the pound.

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.

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