Daily currency report

Economic data continues to weaken and is prompting a rush for the safe haven US dollar and Swiss franc. The franc was the biggest mover in markets as the Swiss government announced a stimulus package that was half of what had been expected. The government sounded resolved with having to live with a stronger currency for the foreseeable future and the lack of Swiss National Bank intervention in forward markets this week left investors feeling safe to buy up the haven again. Economic data in the US continued to show signs of strain while the yen is trading slightly differently to its haven counterparts after economic data in Australia and China prompted Japanese investors to look elsewhere for higher yields sending the yen lower. In the UK, a PMI manufacturing survey is expected to stay in contraction territory, while eurozone PMI will be a final release and is not likely to cause much market movement.

Sterling

A PMI manufacturing survey is expected to remain in contraction territory. A weak figure has likely been priced into sterling, such that any surprise figure to the upside of expectations would prompt a bigger upside swing in sterling. Holding onto gains could be troublesome, however. Cable is losing its grip as the dollar makes broader advances on safe haven flows.

US dollar

The correlation breakdown between stock markets and currencies continues. Equity markets are trending higher, but the safe haven currencies such as the Swiss franc and dollar are not weakening as usual. The weak economic data that has been published in the US recently has contributed to the view that the Fed or US government will have to do something to boost the economy. As such, stocks are getting a boost, whereas safe haven currencies continue to see demand on a weaker growth outlook.

Euro

Economic data released in the eurozone showed flash HICP steady at 2.4 per cent, while the rate of unemployment ticked higher for the third month in a row to 10 per cent. The data suggests that the European Central Bank’s outlook for higher rates has come to an end. The data was not all bad and figures out in Germany helped to support the view that the eurozone economy was not falling off a cliff.

Japanese yen

The Japanese yen is not seeing the same sort of safe haven demand as the Swiss franc and US dollar. Economic data released in Australia and China has spurred yen selling as Japanese investors look for higher yields abroad.

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