The pound hit its lowest level against the US Dollar since January 2017 last Monday at 1.2015 but recovered thereafter on stronger than expected UK data. Average earnings, CPI and retail sales all surprised to the upside and boosted Sterling although the threat of a no-deal Brexit continues to limit any upside.
Of note this week, Prime Minister Boris Johnson is due to meet with German Chancellor Merkel and French President Macron.
The Dollar Index has edged higher this morning although is still below Friday’s two week peak at 98.34. The Greenback benefitted last week from stronger economic data including CPI and retail sales while investors will now turn their attention to the Federal Reserve as Chairman Powell speaks at Jackson Hole on Friday. As it stands, Fed Fund Futures are fully pricing in a rate cut next month with the odds of a fifty basis point cut at just below twenty-percent.
The Euro has seen a relatively flat start to the week with little fresh impetus from over the weekend. EUR/USD is hovering just below 1.11 having touched a two week low on Friday at 1.1066. The pair saw some volatility last week, falling on notably dovish remarks from the ECB’s Rehn before rallying on reports that the German government would be willing to increase debt if a recession hit.
Looking ahead, Euro Zone PMI’s, consumer confidence and the ECB minutes follow on Thursday.
The Japanese Yen remains at the mercy of broader risk sentiment and spent most of last week reacting to trade headlines. USD/JPY remains contained within in the 105-107 range and has been for two weeks with the pair flat this morning at around 106.40.
Looking ahead, Friday’s CPI data will be closely watched.
USD/CHF has matched Friday’s high this morning at 0.9810 with safe-haven demand wilting into the weekend as global equity markets rebounded. Swiss sight deposits jumped 4 billion in the week to August 16th, which has again prompted speculation of possible currency intervention by the central bank.
Better than expected jobs data boosted the Australian Dollar on Friday yet AUD/USD still failed to break above the 0.68 level. The Antipodean currency is being held back by the dovish shift in RBA expectations from several global banks including HSBC and Citigroup who both see steeper cuts.
The RBA minutes are out tomorrow and may provide some further clues while PMI data follows on Thursday.
USD/CAD made a brief appearance above 1.33 last week but the Canadian Dollar was aided by a stabilisation in the oil markets with US crude futures, although a drone attack on a Saudi oil facility over the weekend has heightened tensions.
CPI data is due on Wednesday followed by retail sales on Friday.
EUR/NOK is back below 10 this morning having topped out at a two week high last Thursday at 10.0480.
Investors are now looking ahead to the Norges Bank policy decision on Thursday where they are expected to maintain their hiking bias.
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