Euro Continues to Rise, Breaching 1.47 (page 2 of 2)

This is a testament to the impact of interest rates on currencies because the monetary policy biases of the European Central Bank and the Bank of England have been the main drivers of EURGBP strength. Nationwide house prices were also released this morning. Even though the British pound is weaker across the board, the sell-off was not triggered by the larger drop in house prices. The average price of a home in the UK is now the lowest since 2006. The housing market is a big problem for the UK economy and we expect it to remain a focus next week with mortgage approvals and construction PMI due for release. In addition to that, we are also expecting the manufacturing and service sector PMI reports.

Divergent Performance in the Commodity Currencies

The commodity currencies behaved very differently today with the Australian and Canadian dollars falling against the greenback but the New Zealand dollar rising against it. The only piece of economic data released from any of these 3 countries is New Zealand money supply which was actually weaker than expected. Commodity prices do not explain the move since gold prices increased over $10 while oil prices fell. In the week ahead, we do not have any New Zealand economic data, but we are expecting Australian manufacturing and service sector PMI along with Canadian raw material prices and IVEY PMI.

Japanese Yen Crosses Tumble as Dow Erases Earlier Gains

The Japanese Yen crosses or carry trades are all weaker today as the Dow erases its early morning gains. Stocks continued to suffer on the back of troubles in the housing market and lingering concern about the turmoil in Pakistan. There were a lot of Japanese economic data released last night and on balance, they were more Yen positive than negative. Core consumer prices on a national level were stronger than expected along with the unemployment rate and retail sales. Industrial production and earnings also fell less than expected. The only piece of data that was Yen bearish is the industrial production report. In the week ahead, expect the Dow to continue to drive movements in the Japanese Yen as there are no Japanese economic data on the calendar.