Commentary by Moneycorp
It was an exciting week for the euro. The European Central Bank (ECB) embarked on its 18-month quantitative easing (QE) programme. A public slanging match broke out between the Greek and German finance ministers over whether or not Wolfgang Schäuble had called Yanis Varoufakis ‘foolishly naïve’. And the euro fell rapidly. Then it stopped.
When sterling touched the lows of 2007 and 2008 the sellers came out of the woodwork to buy the euro at its cheapest level in more than seven years. The euro bounced, reducing its losses on the week to four US cents and two cents against the pound.
There is no way of knowing if this is a reversal of the euro’s fortunes or just a correction. Either way, would-be buyers of the euro might like to bear in mind that the last time sterling touched this level was in November 2008.
The dollar was the week’s runaway winner. It strengthened by more than four cents against the euro and went up by the thick end of four cents against sterling.
It got off to a cracking start when last Friday’s US jobs data smashed investors’ already-optimistic expectations. Unem-ployment fell to 5.5% and nonfarm payrolls jumped by 295k. This week’s data attracted less attention: there were fewer of them and, anyway, investors were distracted by the sharp decline of the euro as the ECB’s money-printing QE pro-gramme got under way. That was just as well, because Thursday’s news of a -0.6% monthly fall in US retail sales was a big disappointment. Sterling missed the cut because of equally-disappointing UK production data and as a result of comments from the BoE governor. He said the strength of sterling reduced the upward pressure on interest rates.
All three Commonwealth dollars had a reasonably good week, though every one of them lost ground to the class-leading US dollar. The Loonie was the least successful, strengthening by a cent against sterling and losing one and a half US cents.
The Aussie could not quite keep pace with the Kiwi: it added a cent and three quarters against sterling and lost one and a quarter US cents.
Business and consumer confidence were both weaker and mortgage lending was down by more than expected. On the positive side, for once the employment data were not wildly adrift from analysts’ forecasts: they showed 15.6k new jobs and the rate of unemployment ticked down to 6.3%.
The Kiwi was the most successful, strengthening by two and a quarter cents against sterling and losing one US cent.
The NZ dollar did not get off to a great start but its breakthrough came on Thursday when the Reserve Bank of New Zealand issued its monthly policy statement. The bank presumably hoped it would send the NZ dollar lower when it said “a substantial downward correction in the real exchange rate is needed.” But it didn’t happen. Instead, the Kiwi promptly strengthened by three cents.