Although Sterling finished Friday on the front foot, the UK currency took a hit earlier in the week after the Bank of England turned a touch more dovish. Policymakers said they expect inflation to fall back to target faster than previously expected and see the need for only limited tightening over the forecast horizon.
Labour market data due tomorrow will be the main focus this week although Brexit headlines always provide a risk. EU Brexit Minister Michel Barnier warned on Friday that there is a risk Brexit talks could fail.
The Dollar touched a four-month peak last Wednesday although gains proved short lived as the US 10-year yield failed to sustain another break above three-percent. The Greenback limped somewhat into the weekend after CPI data came up short on Thursday and remains subdued to start the week.
Looking ahead, retail sales due tomorrow and housing data plus industrial production on Wednesday will be the main data points. FOMC speakers are also worth watching with five policymakers due this week.
We saw some weakness in the Euro last week on some soft macro releases, but the single currency found some support towards the end of the week. Italian political parties appeared to be moving towards a workable government after Berlusconi’s Forza Italia seemingly stepped aside. Negotiations gathered steam over the weekend and a deal looks likely this week
We look ahead to a big week for data in the Euro Zone with Q1 GDP due tomorrow and CPI on Wednesday.
The Japanese Yen was relatively quiet last week. The US 10-year yield did break above the three-percent level again which provided a weight although thus proved short lived. Close to home, second tier macro releases were largely ignored.
The Summary of Opinions from the BoJ also offered little in the way of new rhetoric.
This week, we await GDP figures on Wednesday and CPI on Friday.
The Swiss Franc appears in consolidation mode for the time being. Usd/Chf did nudge below parity on Friday and continues to linger around that level as investors wait for some direction.
This week we await PPI data tomorrow and comments from SNB President Jordan on Wednesday.
The Australian Dollar finished last week on the front foot, supported by rising commodity prices (notably oil). Domestic impulses may have limited gains however as home loans fell short of forecasts.
This followed Tuesday’s soft retail sales report. Looking ahead, oil prices are expected to remain a key drive although the RBA minutes due tomorrow and jobs data on Friday will also be closely watched.
The Canadian Dollar was set to finish the week on a high, bolstered by positive NAFTA headlines and rising oil prices but was knocked on Friday after jobs data came up short.
The Canadian economy actually lost 1.1K jobs in April while the unemployment rate remained at 5.8%. Friday’s CPI data is likely to be the main focus this week.
NEW ZEALAND DOLLAR
The New Zealand Dollar finished last week as the weakest of the G10 currencies. The bulk of declines came on Thursday after the RBNZ said the next direction in rates is equally likely to be a hike or cut. RBNZ Orr added on Friday that the decline in the currency was a good thing. PPI and budget data are due this week although focus will likely remain on the central bank.
The Swedish Krona saw some modest upside last week despite confirmation of a pullback in CPI on Wednesday. Risks remain to the downside however given recent dovish Riksbank’s commentary. It could prove a quite week ahead with only capacity utilization data due on Wednesday.
The Norwegian Krone was fairly uneventful last week with little reaction shown to Wednesday’s CPI data despite a minor beat at +2.4% YoY (f/c. +2.3%). Recent Norges Bank rhetoric is likely to keep the pair support for now with GDP due tomorrow.
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