Two events propelled the Sterling – Euro exchange rate higher yesterday. The UK retail sales data was very impressive. As expected, the beer tokens had been in full advance during the early stages of the Rugby World Cup and the slight improvement in the weather (summer as we call it) brought the shoppers out. That gave Britain a 1.9% rise on the month of September in retail activity; a 6.5% rise on the year and 50% better than most forecasts. Sterling strengthened rather unsurprisingly.
Then we had the European Central Bank President talking about an expansion of their bond buying program (their version of QE) as soon as December. Crikey, said the markets and 'sell' was the call on the Euro. It weakened against all comers; down 3 cents against the US Dollar and up nearly 4 cents in the Sterling – Euro rate. We get Eurozone purchasing managers indices today which should be universally poor, so the euro is unlikely to gain any succour there and may well weaken further as the day eases into the weekend.
We've seen the Australasian Dollars strengthen overnight. The reason behind this move is a bit tricky to fathom but everything from US Dollar weakness to improved confidence in the Aussie and Kiwi economies to profit taking have been cited. I suspect the latter is the most likely culprit because the USD is stronger against the Euro and a tad stronger against Sterling.
This afternoon brings Canadian inflation data. Estimates vary but it is likely this will be a slight downturn on the previous month. The Canadian Dollar; like other commodity linked currencies, is more susceptible to volatility through fluctuations in those markets than anything else but inflation is one factor in the Bank of Canada's policy decisions, so it is influential.
The only other data is the US manufacturing PMI and we don't think we will see much movement there, so perhaps the USD will be relatively tranquil.
But we don't care about all that do we. We have Rugby World Cup semi-finals to watch and, judging by last week's nail-biters and exhibitions, both should be belters. Let's all boost UK retail sales again with some more beer.
Have a great weekend everyone.
I've just checked my bank account and it looks as though I can live comfortably without having to work another day for the rest of my life ....as long as I die on Monday morning.