The week was full of surprises. US inflation figures and the release of the FOMC minutes did not go the way many thought, which provided a good degree of volatility. The euro traded in ranges against the US dollar, but the dollar was able to achieve fresh one-year highs against sterling and seven-year highs against the Japanese yen. Outside of major currency markets, the Australian and New Zealand dollars came under heavy selling pressure alongside the Japanese yen. The two dollar currency fell as commodity prices touched five-year lows. The yen’s decline occurred as snap parliamentary elections were called for when Prime Minister Abe announced he would be postponing the sales tax increase by 18-month, which was expected to occur next year. There was a long line-up of data, but the figures continued to pain a familiar story of low growth in the eurozone and mixed to moderate growth in the US.

Euro

The euro managed fresh six-year highs against the yen, five-week highs against sterling and three-week highs against the US dollar, while touching two-year lows against the Swiss franc. The euro’s upside was limited early in the week when ECB president Mario Draghi reiterated the ECB’s determination to maintain price stability at all costs. At the same time the economic outlook was not altered much by economic data.

Sterling

Sterling moved to fresh one-year lows against the US dollar and five-week lows against the euro before stabilising. A kneejerk reaction was seen when inflation figures were released at the beginning of the week. Consumer prices rose off five-year lows, which was sterling positive, but that excitement wore off quickly when producer or pipeline price pressures were seen easing. Sterling was given a second and third chance to find its footing though.

US dollar

The US dollar saw no real help from the FOMC minutes. Markets were slightly wrong-footed in assuming that the minutes would be more positive on the future of the economy. Rather, a great deal of attention was placed on concerns over soft price pressures, which limited the dollar’s ability to rise. Economic data was mixed, particularly in the housing sector. A stronger than expected builder sentiment survey seemed to stand in contrast with housing starts, which missed forecast. On the other hand, growth and jobs data continued to support a more positive outlook.

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.