Safe-haven switch


If investors cared about existing home sales the USD might have done better on Friday: for the first time in two months sales increased in May, up by 2.5% from April. The other data, however, Markit's provisional purchasing managers' index readings, looked rather glum. The manufacturing and services PMIs were both lower in June, not by much but at 50.1 and 50.7 they were a step closer to the breakeven level at 50 and both were below forecast.

The USD also had to contend with an outbreak of dovishness from the Fed.  St Louis Federal Reserve president James Bullard explained why he voted for a rate cut and Minneapolis's Neel Kashkari said "aggressive policy action… is required to re-anchor inflation expectations". The New York magazine portrays the dovish Mr Kashkari as a possible future Fed chairman.


An unexciting but profitable day took the EUR higher against all the other major currencies. It shared the lead with the Scandinavian crowns, the SEK and NOK, strengthening by 0.7% against the USD.

IFO's report on German business sentiment this morning noted that "The mood among German company managers has cooled further". The business climate index "fell from 97.9 points in May to 97.4 points in June… its lowest level since November 2014". Investors were not unduly concerned, perhaps because of the relatively good provisional PMI, on Friday.


The direction of travel of the CAD tended to coincide with that of oil prices but the results were inconsistent. WTI crude managed a 1.2% rise while the CAD is unchanged on the day against the USD.

It was the Canadian retail sales data that spoiled things for the Loonie. Monthly increases of 0.1% for sales with and without autos fell short of the already-modest 0.2% and 0.3% predictions. They were a pale shadow of the previous month's 1.3% and 1.8% increases.


From the economic point of view, sterling's story has been event-free since Friday's public sector borrowing numbers. Politically, things have been rather more interesting. A contender to be Britain's next prime minister attracted the attention of police following a domestic argument Subsequently. Johnson has refused to answer interviewers' questions about the incident. His opponent Jeremy Hunt wrote in today's Times newspaper "Don't be a coward Boris, man up and show the nation you can cope with the intense scrutiny the most difficult job in the country will involve." A head-to-head live broadcast scheduled for Tuesday is in doubt because Johnson has yet to confirm he will attend. Investors do not see the consequent erosion of Johnson's opinion poll lead as bad for sterling: the GBP is 0.4% higher against the USD.


Tensions such as those in the Middle East are normally positive for the JPY. This time around that safe-haven advantage is far from obvious. Where the yen is flat on the day against the USD the CHF is 0.6% higher and gold is up by 1.2%. One argument is that most of Japan's oil is carried through the Strait of Hormuz: if that conduit were to be blocked Japan would have a problem.

The Japanese data released overnight had no obvious effect on the currency, though both were a little better on the month. The coincident index was a point higher at 102.1 and the leading index edged up from 95.7 to 95.9.

Sign up for a free account

Sign up for a free account

Access our convenient and secure online platform to process your international payments. Manage beneficiaries and view payment status and history at the click of a button.

Find out more
FX business solutions

FX business solutions

We provide tailored services to help companies make international payments and manage their foreign exchange risk

Find out more