This was the week for European businesses to put currency strategies in place before a tidal wave of event risk hit markets next week, while absorbing and digest the policy measures taken at the September European Central Bank meeting. The euro’s mammoth decline against the US dollar steadied as attention swung towards the Scottish independence battle, as the neck-to-neck race between separatists and pro-union forces rattled markets. Not only will the vote for Scottish independence take place next week, but it follows a day after the US Central Bank makes its policy announcement. As if that were not enough, there is a wide variety of important economic data in the UK, the minutes of the Bank of England’s policy meeting will be released and the Swiss central bank is scheduled to announce its monetary policy decision. Three years ago the Swiss National Bank embarked upon unique policy measures that prevented the strengthening of its currency. So far they have been successful, but given the action taken by the ECB, the SNB may be required to move interest rates into negative territory in order to maintain its cap for the Swiss franc.

Euro

The euro’s plunge against the US dollar was halted at 14-month lows. The sharp deterioration in the currency came after the ECB announced that it was moving all three of their main rates lower by 10-basis points. Not only was the deposit rate taken deeper into negative territory, but the European Central Bank also announced that they would be embarking upon purchases of asset backed securities as well as covered bonds in an effort to stimulate the economy and fend off deflationary pressures. Helping the euro steady against the US dollar was the release of better than expected German figures. Against the Swiss franc the euro rebounded sharply on the notion that Switzerland was getting ready to announce negative rates, while swings against sterling were a matter of exit polls on the Scottish referendum. One story that had been weighing on the euro, did appear to lessen. The euro moved to fresh two-month highs against the yen as the yen faces intense selling pressures against the US dollar.

Sterling

What Scottish Independence polls said, dictated where sterling moved. A predicted yes vote outcome saw sterling head sharply lower; while the losses were reversed when pro-union forces were seen winning the vote. The fact that industrial output increased at its fastest pace in six-months and there were comments from the head of the central bank suggesting rates may need to head higher sooner rather than later seemed to have little impact on sterling, but could come centre stage next week once markets are through the referendum.

US dollar

There was little to no economic data released in the US this week with the primary exception being retail sales. Sales figures were expected to improve at the end of the week, which leading into next week’s FOMC policy meeting could see the dollar finishing higher.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.