Major currencies were steady in European trading on Monday as risk aversion and central bank meetings later in the week kept investors on the sidelines despite some key data releases. The US dollar inched higher against most other currencies but was weaker against the Japanese yen. The euro saw a mixed response to flash inflation numbers out of the Eurozone, while the pound held near last week’s 10-month highs ahead of ‘Super Thursday’.
Fresh geopolitical tensions gave rise to some risk-off sentiment at the start of the trading week following Friday’s long-range missile test by North Korea. Gold climbed to a near 7-week high of $1270.98 an ounce in the Asian session and the yen was firmer against most major currencies. The Swiss franc was also broadly up, including against the euro where it looks on track to end the single currency’s run of four straight sessions of sharp gains. The euro was marginally weaker at around 1.1375 francs, having hit a 2½-year high of 1.1406 francs on Friday. However, the franc was slightly down against the dollar with the greenback reclaiming the 0.97 handle today.
Better-than-expected data out of the Eurozone failed to lift the euro on Monday. Flash inflation readings for the euro bloc showed headline CPI was unchanged at 1.3% year-on-year in July, in line with forecasts. However, the core reading, which excludes food and energy prices, beat expectations of 1.1% to rise to 1.3% y/y – the highest since August 2013 – from 1.2% in May. Also coming in stronger-than-expected was the Eurozone’s unemployment rate, which fell to 9.1% in June from a revised prior and expected figure of 9.2%.
Traders also shrugged off robust German retail sales numbers released earlier in the day. The euro rose slightly after the data before continuing its steady downtrend during the course of the day. It was last trading at $1.1732, having opened at $1.1761.
Sterling also lost some ground against the dollar but remained supported above the $1.31 level for most of the day. The British currency briefly fell below $1.31 after lending figures released by the Bank of England showed consumer credit rose less-than-expected in June, although mortgage lending increased more strongly than anticipated. The BoE had recently warned about unsustainable increases in consumer debt and today’s rise, which was the slowest in over a year, may be of some comfort to the Bank, which meets on Thursday for its latest policy meeting.
Meanwhile, the greenback remained pressured against the yen even as it recovered against its other peers. Dollar/yen hovered around 110.50 for much of the day as the ongoing turmoil in the White House continued to worry investors. US data today included the Chicago PMI and pending home sales.
The Chicago PMI – a gauge of business activity in the Chicago region – fell to 58.9 in July from 65.7 previously and was below forecasts of 60.0. Pending home sales rose by more-than-expected however, jumping by 1.5% in June, compared with the 0.7% gain anticipated.
Another currency heading down versus the US currency was the Canadian dollar. A bigger-than-expected drop in Canadian producer and raw material prices weighed on the loonie today, as well as a downward reversal in oil prices. Dollar/loonie gained about 0.5% to 1.2485 in late European trading, moving away from last week’s 2-year low of 1.2412.
Oil prices reversed earlier gains when they were lifted by the prospect of US sanctions on Venezuela, which is a major oil producer and OPEC member. Prices were also boosted by reports that OPEC members will hold a meeting in Abu Dhabi next week to discuss improving compliance to the output deal. WTI and Brent crude hit 2-month highs of $50.06 and $52.92 respectively before retreating. The commodity came under pressure after analysts cut their forecasts of crude oil prices for 2017. This led to the WTI oil price falling by 0.8% in late session to $49.30 a barrel, though the price of Brent was down a more moderate 0.3%.