Economic Situation
The oil has resumed its advance. The strikes by the Houthi rebels against Saudi Arabia pushed Brent to $116.72 by Friday evening: a closing high not seen since April 29, up 6.2% in seven days and almost 70% above last year’s average.
Currencies, meanwhile, mostly followed the central banks: those from which investors expect a rate increase rose. The Canadian dollar provides the clearest illustration.
The Bank of Canada warned that inflation would be “significantly higher” than it had estimated in July, and a rate hike on Wednesday is now deemed likely by more than 75%, versus a one-in-three chance seven days earlier. Nothing is decided yet, as the country shed 68,000 jobs in September.
The yen, for its part, owes its rise to fear. Thursday, the US technology stock index fell by 2.6%, and investors gravitated back toward the Japanese currency, which serves as a safe haven when markets wobble. The prospect of a December Japanese rate hike sealed the deal.
The euro did not benefit from either of these forces. The euro area imports its energy abroad: an expensive barrel weighs on its bill and slows activity. The first October activity index fell to 51.9, versus 52.7 expected. This slowdown, in our view, is restraining the European Central Bank. As long as crude stays at this level, the euro will be poorly equipped against currencies with rising rates.
Currencies, meanwhile, mostly followed the central banks: those from which investors expect a rate increase rose. The Canadian dollar provides the clearest illustration.
The Bank of Canada warned that inflation would be “significantly higher” than it had estimated in July, and a rate hike on Wednesday is now deemed likely by more than 75%, versus a one-in-three chance seven days earlier. Nothing is decided yet, as the country shed 68,000 jobs in September.
The yen, for its part, owes its rise to fear. Thursday, the US technology stock index fell by 2.6%, and investors gravitated back toward the Japanese currency, which serves as a safe haven when markets wobble. The prospect of a December Japanese rate hike sealed the deal.
The euro did not benefit from either of these forces. The euro area imports its energy abroad: an expensive barrel weighs on its bill and slows activity. The first October activity index fell to 51.9, versus 52.7 expected. This slowdown, in our view, is restraining the European Central Bank. As long as crude stays at this level, the euro will be poorly equipped against currencies with rising rates.
Exchange Rates: The Technical View
Two currencies have returned to their best level against the euro since the start of July. On Friday, 1.5665 Canadian dollars per euro at the European Central Bank reference rate, i.e., 1.69% lower than seven days earlier, and 175.51 yen, i.e., 1.30% lower.A Quebec self-drive or a Japan tour priced in the country’s currency thus costs more than in mid-October. This level, in our view, will hold only if the Bank of Canada indeed raises rates on Wednesday: without action on its part, the euro would rise toward 1.5920 Canadian dollars.
The other currencies moved less. The euro is worth 0.8373 British pounds, 0.9227 Swiss francs and 1.1193 US dollars, after declines of 0.78%, 0.49% and 0.53%. This drop against the dollar stems from the euro’s weakness against all three, rather than a particular strength in the American currency.
We see the euro moving between 1.1110 and 1.1320 dollars this week, likely toward the bottom end of this range if the US Federal Reserve reinforces on Wednesday the December rate rise that almost all investors already expect.
Egypt, at the opening of its winter season, is moving in the opposite direction. Its currency has weakened for two weeks, for the same reason as the euro: the country imports more petroleum products than it sells, and a dear barrel pushes up the demand for dollars. The dollar rose from 53.18 Egyptian pounds on October 14 to 55.90 on October 25, according to the country’s central bank, which quoted the euro at 62.63 pounds on the same day. A stay on the Red Sea priced in local currency thus costs less than at the start of the month.
| WEEKLY SUPPORTS | WEEKLY RESISTANCES | |||
| S2 | S1 | R1 | R2 | |
| EUR/USD | 1.1110 | 1.1150 | 1.1260 | 1.1320 |
| EUR/GBP | 0.8290 | 0.8330 | 0.8420 | 0.8460 |
| EUR/CHF | 0.9140 | 0.9180 | 0.9270 | 0.9310 |
| EUR/CAD | 1.5500 | 1.5600 | 1.5800 | 1.5920 |
| EUR/JPY | 173.50 | 174.50 | 176.90 | 178.00 |
The supports and resistances shown below indicate the lower and upper levels within which prices are expected to move during the week.
The information presented in this publication is provided for informational purposes only and does not constitute investment advice, nor an offer to sell, nor a solicitation to buy, and should in no way be used as a basis or be considered as an inducement to engage in any investment.
Mondial Change is a French financial institution, founded in 2015, specializing in the management of international payments and exchange risk.
Mondial Change accompanies many players in tourism, travel agencies, tour organizers, tour operators, inbound operators…
www.mondialchange.com
Contact: [email protected]
Mondial Change accompanies many players in tourism, travel agencies, tour organizers, tour operators, inbound operators…
www.mondialchange.com
Contact: [email protected]
