G7 green light for weaker yen
Some Saudi Arabian students in Michigan take turns to cook lunch at the weekend. When Talal Al Rouki’s turn came up he made a rice dish called kabsah. Having prepared it he carried round to his friend’s house in the cooking pot. That pot being a pressure cooker and Mr Al Rouki being a Saudi Arabian, his neighbours naturally assumed he was about to blow something up and they called in the FBI. Armed Feds swooped on the suspect’s house and questioned him about the pressure cooker which, a witness alleged, was “bullet-coloured”. They eventually accepted that pressure cookers can also be used for culinary purposes and Mr Al Rouki avoided spending the rest of his life in Cuba.
Also escaping summary punishment this weekend was the Japanese yen. After meeting in, of all places, Aylesbury, G7 finance ministers held back from criticising Japan for its 30% devaluation of the yen. The official line is that G7 members must not deliberately seek to depreciate their currencies but, if that is what happens as a result of other economic policy, it’s alright. It gives a green light to a further decline for the yen, which passed through the psychologically important ¥100:US$1 mark on Thursday and will probably not see that level again for several years.
The yen did not move far on Friday though, in common with most other major currencies. The US dollar strengthened by nearly a cent against the pound and the Swiss franc weakened by half a cent. They were the outliers; the euro, the yen and the commodity dollars all start today less than a quarter of a (euro) cent away from Friday’s opening levels.
Friday’s data showed a slight narrowing of Britain’s trade deficit. They were in line with forecasts, as were the Canadian employment numbers, which included 12.5k new jobs and an unemployment figure steady at 7.2%. This morning Australia reported a useful 5.2% increase in mortgage lending but business confidence deteriorated from +2 to -2. Figures from China showed a 9.3% increase in industrial production and a 12.8% rise in retail sales.
The rest of Monday’s agenda is very sparsely-populated. From Europe come Swiss retail sales and Portuguese inflation. This afternoon’s US retail sales numbers are undoubtedly the most important announcement of the day. And that’s the lot until the NZ retail sales data tonight and house price figures from New Zealand (REINZ) and Britain (RICS). Excitement is not likely to be the theme unless US retail sales are way off track.
Kind Regards
Moneycorp
Manufacturing PMIs expect to disappoint
Yesterday’s newspapers did not really excel themselves with their April Fool stories. The Daily Express told readers they could book a suite at Buckingham Palace for £10k a night. The Mirror showed an unconvincing picture of Virgin’s new glass-bottomed plane. Perhaps the best spoof was the piece in the Telegraph describing the Slovenian finance minister’s confidence that his country will not need a Cyprus-style bailout and there will be no precautionary exodus of bank deposits. Bloomberg’s story about Cyprus hoping to negotiate easier bailout terms with the EU/IMF/ECB troika turned out to be true.
If there was little fun to be had from the media there was even less to be found by the currency investors and traders whose job it was to make something out of London’s four-day weekend. The City accounts for more than a third of all FX turnover*. That doesn’t just mean that when London is on holiday activity falls by a third, it means that liquidity disappears and the market dries up. There was some movement; it is relatively easy to push currencies around when liquidity is scarce. But for the most part investors were content to take it easy and do the bare minimum.
Over the four days the biggest winner was the Japanese currency, which strengthened by one yen against the pound and the euro and by one and a quarter against the US dollar. The dollar itself was tail-end Charlie, falling by a cent against the pound and three quarters of a cent against the euro. The three commodity dollars all made modest gains.
Thursday’s crop of economic statistics was vaguely disappointing but contained no real horrors. A 0.4% monthly rise on German retail sales was overshadowed by a larger than expected -2.2% annual fall. Fourth quarter US gross domestic product (GDP) was downgraded to an annualised 0.4%; that converts to quarterly growth of an almost invisible 0.1%. The Chicago purchasing managers’ index (PMI) fell short of expectations by four points at 52.4. Japanese CPI deflation accelerated to -0.7% and unemployment ticked up to 4.3%. On Friday a -16.4% annual fall in Greek retail sales was no great surprise and the Michigan survey of US consumer confidence surprised on the upside at 78.6.
Monday saw the opening shots in the monthly manufacturing sector PMI contest. The main one from China was slightly more positive at 50.9 and the main one from the States three points lower at 51.3. Australia’s performance of manufacturing index completed a year in the contraction zone, falling by a point to 44.5. Earlier this morning there was no reaction from the Australia when the reserve bank kept its Cash Rate unchanged at 3%.
Coming up today are manufacturing PMIs from Italy, France, Spain, Switzerland, Germany, Euroland and Britain. Only the Swiss measure is forecast to be in the growth zone above 50. Also out this morning are the German inflation data and unemployment figures from around the euro zone, which are not expected to look very pretty. The Bank of England releases figures for money supply, personal loans and mortgage approvals.
Sterling starts this morning looking a little out of sorts. After it’s broadly positive performance in March it might have to give something back this week.
*Source: The Bank for International Settlements’ Triennial Central Bank Survey 2010. A new one will be taking place this month.
New Office Opening – Moneycorp Ireland
We are delighted to announce the launch of a new geography within our commercial foreign exchange (CFX) service; Moneycorp Ireland. Due to a high demand in the Irish market for expert provision of foreign exchange services for businesses, we will be broadening our CFX service offering as part of our growth plans over the next few years.
Andrew Woolley, CFX Executive Director says “This is an exciting time for Moneycorp. We believe that Irish customers are underserved in the current market place. By coupling our foreign exchange and payments expertise in the market with the local knowledge of our Irish management team will bring, we can now offer Irish businesses a market leading service.”
Based in Dublin, Moneycorp Ireland will have a full service dealing desk manned by a team of experienced foreign exchange professionals; providing solutions to both corporate and SME’s with FX exposures and broader international payment requirements. Banks have been removing this service from their core offerings and this lack of choice for customers is an opportunity for us to help those struggling to move funds cross-border.
Incorporating the same ethos that has served Moneycorp so well in the UK, the business will provide clients with competitive pricing, bespoke service and sophisticated technology to leverage our expertise in the global foreign exchange markets. We know that Irish exporters and importers will welcome our service as they look to manage their financial exposures in these challenging economical times.
Disappointing data and anti-EU isolationism weigh on pound
In his book “The Examined Life” psychoanalyst Stephen Grosz warns against praising children without good reason. Telling them “you’re so clever”, he says, can damage their confidence and hinder future performance at school. Mr Grosz argues that the finger-painted smears of a four-year-old should not be likened by a doting parent to the work of Michelangelo at his creative peak. Similarly, counting three elephants in a picture does not equate to Einstenian mathematical genius. Mr Grosz advises parents and teachers instead to congratulate children for trying really hard. So; “You tried really hard with that painting sweetie, but I’m afraid it’s rubbish. It looks nothing like mummy.”
By the same token, British firms should be praised for trying really hard to produce stuff in November but unfortunately, according to Friday’s data, their results were rubbish and looked nothing like the numbers forecast by analysts. Mines and quarries did well enough, with output up by 8.7% in November compared with the previous month. Elsewhere, however, most measures were lower on the month and the year. Manufacturing was down by -2.1% compared with the same month in 2011 and the broader industrial production measure was -2.4% lower.
The weaker-than-expected figures sent sterling lower against the European currencies. The immediate impact was not severe – only about a quarter of a euro cent – but there was further erosion in the afternoon. Sterling starts this Monday more than a cent down from Friday’s opening levels and nearly two and a half cents lower on the week. The news is not all bad though: the pound is one yen higher on the day and four yen firmer on the week. Against the US, Canadian, Australian and New Zealand dollars it is unchanged from Friday’s opening levels.
It was interesting to see in those movements how the Swedish and Norwegian crowns moved higher with the euro while the pound was left behind. The rebirth of investor confidence in the single European currency has coincided with new misgivings about the United Kingdom. The economy is one worry. It is likely that next week’s preliminary figures will show gross domestic product to have fallen in the fourth quarter of 2012. The NIESR puts the decline at -0.3%. There is also growing concern that anti-European isolationism and the prime minister’s promise of a referendum could inadvertently lead to Britain seceding from the European Union. Investors struggle to see any upside for the country in such an outcome.
There are no UK data to hurt the pound today but those worries will continue to weigh on it. On the positive side, Euroland industrial data this morning will probably make Friday’s UK readings look good. Analysts predict a monthly increase of 0.2% and a -3.1% annual fall (UK 0.3% and -2.4%). The Bank of Canada’s business outlook survey this afternoon is the only item on the North American agenda other than speeches by the Federal Reserve chairman and two of his henchmen. NZIER’s New Zealand business confidence index comes out tonight, followed by the RICS UK house price index.
A Place in the Sun, Birmingham, UK
Thanks to our partners, colleagues, and clients for a fabulous show Sept 29 to Oct 1st at the NEC in Birmingham. Moneycorp held a champagne reception for our partners and as you can see, a great time was had by all …
From Guy Fawkes Kissimmee to National Association of Realtors in Anaheim, California – Moneycorp is Coast to Coast this Week!
It was our distinct pleasure to join Guy Fawkes Kissimmee, a traditional British holiday, as a Gold Sponsor this past weekend, we had a great time with about 2500 attendees and have lots of pictures to show. Now on to the Natl Assoc of Realtors Conference & Expo in Anaheim, California from November 11-14th .Please visit us at Booth 1000 and at International Night on Saturday the 12th which we are also Sponsoring.
Pictures from Guy Fawkes Kissimmee
Positive News From The Euro Zone!
The markets opened slightly better this morning on the back of some relatively positive news from the Euro Zone.
Hitting back from a low of 1.5414, the Pound opened at 1.5551 against the US Dollar, the Euro and CAD followed suit opening at 1.3370 and 0.9614 respectively. So why the slight improvement? Again investors are hinging their trading patterns on news across the pond. Last week, Moody’s downgraded 11 British and 1 Spanish bank. The Euro and Pound lost 2 cents on the back of this. BY the end of the week, talks surrounding recapitalizing banks followed by the announcement that Belgium, Luxemburg and France are going to bail out Dexia Bank, caused the Pound and Euro to gain the 2 cents back when the markets opened in Asia.
The CAD, GBP and EUR are all still trading on the downside so anyone looking to sell at the moment should do so now, instead of waiting for further downward movements. Call us today to find out how we can help lock rate sin and protect against fluctuations