Last week ended with a poor showing on US Durable goods orders; a fall of 1.3 percent was below expectations and added to the pressure on the US Dollar which has lost ground as investors have sought a combination of safety and higher yield elsewhere. The safety seekers are tending to favour the Swiss Franc and Japanese Yen both of which are ripe for further intervention by their respective central banks. We also get the influential Tankan business sentiment survey from Japan tomorrow so this could be a very significant week for Yen traders. The higher yield seekers are favouring the Australasian Dollars. Everyone else seems to prefer the Euro to the Pound right now.
The Euro failed to press above USD 1.35 though, even after a positive German business sentiment index from the Ifo institute. The Euro slipped back in late Friday trade and remains below that level this morning. This is seen as a crucial break point by many traders; a move above USD1.35 for the Euro would open up the potential for another 5 cents of gain and that would be very bad news for those seeking to import from Europe into the US and the UK. Sterling has not been as robust as the Euro as we can see by last week’s fall from €1.23 to €1.17 which is where we start this week.
This week could bring significant changes in these ranges though. The markets are quite precariously positioned ahead of this week’s release of the UK and US economic growth data. These are the third and final assessments of the growth in the UK and US economies for quarter 2. No one is expecting any major revisions so as long as these numbers print in line with previous estimates, they will only reinforce the nervousness over the state of each economy but beware of any amendments and their effects.
We will also get the Canadian Economic growth data and that could be interesting because the Canadian Dollar has not performed as well as the currencies of other commodity-reliant economies. Canada offers a lower interest rate than the likes of Australia, New Zealand and South Africa so whilst investors may seek these currencies when they are in the mood for risk taking and fancy higher yields, they tend to shirk the Canadian Dollar. Perhaps that weakness in the currency is boon for Canadian exporters though.
Although Monday is devoid of meaningful data releases, the rest of the week is a very lively one. As well as the three GDP figures mentioned above, we also get US income and expenditure data, Eurozone unemployment numbers, a raft of government debt numbers and consumer inflation figures from Germany and Japan. It is also the last week of the month which can increase volumes so it promises to be lively.
It will also be lively for the Labour party who elected a Milliband as their next leader and he will have to form some kind of coalition with his defeated brother or do thing they usual do with failed leadership contenders and find him a cushy number in Brussels. How do you say Gravy Train in Flemish?