Anxiety over the outlook for global growth and deflation grew on the back of a variety of events. Chinese inflation figures came in at five-year lows, which triggered concerns. Then the price of oil continued its downward descent. That negatively impacted oil exporting currencies like the Norwegian krona. The Norges central bank cut interest rates, which knocked the currency even lower. The Reserve Bank of New Zealand helped lift its local currency when it announced that targeted inflation would be met and brought forward rate expectations. In Switzerland, the SNB announced that downside price risks had increased, but left monetary policy unchanged. In Russia, the central bank increased interest rates by 100 basis points to 10.5 per cent in an attempt to halt the depreciation of the rouble.

Euro

The euro erased losses when US non-farm payrolls data blew away expectations contributing to dollar gains. The built up euro short positions were closed this week in a round of profit taking. The small amount of economic data that was released was mixed. German and French industrial output figures were weaker than forecast, but sentiment for investors improved. As Greece called for early elections, Moody’s announced that its rating outlook for EU banks had soured. Both headlines did little to inspire higher euro levels to push beyond major resistance levels against the US dollar. It was reported that banks took up an amount of long-term loans that was expected, which should ultimately stimulate credit growth in the real economy

Sterling

The central bank is expected to start publishing its minutes faster and will cut the number of meetings it holds next year, which is in line with the changes being made at the European Central Bank. The impact on sterling was limited, as economic data released this week was seen as mixed. A house price survey showed prices slowing to an 18-month low, while industrial and manufacturing output figures failed to meet forecast. Offsetting this bad news was the trade balance, which saw its deficit narrow to a seven-month low. Further a BRC retail sales report reflected a growing consumer demand based on the back of heavy discounting going into the holiday season.

US dollar

There was very little in the way of economic data released this week in the US. The government appeared ready to avoid another government shutdown, while currency markets preferred to follow equity market developments. The dollar erased gains early in the week that came as a result of last week’s non-farm payrolls figure which rose to three-year highs as it added 321k new jobs to the economy. Looking at growth figures, wholesale inventories rose more than twice what was expected, which bodes well for the figure.