Last week was a choppy one for the Pound as investors reacted to progress, and later the lack of, in the cross-party Brexit talks. The prime minister has consistently refused to entertain a second public vote, insisting she is focused on ‘’delivering the result of the first referendum’’ meaning the chances of a deal are extremely slim unless there is considerable movement of either parties stance.
Friday’s GDP data was inline and largely ignored although industrial production surprised to the upside. Looking ahead, labour market indicators are due tomorrow.
The Dollar Index was flat this morning at 97.3 having shown little reaction to the broad downturn in risk sentiment to start the week. Weekend press reports would suggest the US and China have moved further apart in trade negotiations although the US are expected to send a delegation to Beijing to continue talks. In the last few hours, China has responded to last week’s US tariffs on $200bn of Chinese goods by imposing their own tariffs of between 5% and 25% on $60bn of US imports from June 1st which covers over 5,000 products.
On the data front, Friday’s CPI miss may still be in play given Jerome Powell’s insistence that weakness in inflation is temporary.
Looking ahead, retail sales and industrial production are due on Wednesday, housing starts and claims on Thursday and Michigan Sentiment on Friday.
The Euro touched a daily high of 1.1254 on Friday, its best level since May 1st as investors looked past the recent Italian political wrangling. The single currency may still have been deriving support from stronger-than-expected Euro Zone data released at the beginning of the week including retail sales and service PMI.
German ZEW data is due tomorrow followed by Euro Zone GDP on Wednesday and CPI on Friday.
The Japanese Yen has been at the mercy of broader risk sentiment in recent trading sessions and finished Friday as one of the strongest G10 currencies for the week as US-China trade talks stuttered. USD/JPY touched 109.47 on Thursday, its lowest level since February 4th although extended to 109.13 this morning as the US and China appear to have moved further apart over the weekend.
EUR/CHF slipped to a fresh two-week low on Friday at 1.1360 despite a reminder from SNB President Jordan that the Swiss Franc remains highly valued. Other domestic impulses were limited beyond the unemployment rate which held steady at 2.4%.
The Australian Dollar touched a fresh four month low in the run-up to Tuesday’s RBA decision at 0.6946 but rose thereafter as policymakers opted to leave the Cash Rate on hold. Most economists still believe a rate cut is a matter of ‘when’ rather than ‘if’ and their argument gained further traction on Friday as the RBA slashed their growth and inflation forecasts in their quarterly report.
The Dollar has also softened this morning as risk sentiment wavered on a lack of progress in the US-China trade talks.
NAB and Westpac indicators are out tomorrow followed by wage data on Wednesday and employment numbers on Thursday.
NEW ZEALAND DOLLAR
The RBNZ cut their key policy rate to a record low of 1.50% on Wednesday and indicated a greater than fifty-percent chance that it could go lower. The New Zealand Dollar dropped in response with NZD/USD touching a low of 0.6526 – its lowest since November 2018.
Business NZ PMI and PPI are both due on Thursday.
The Canadian Dollar rose sharply on Friday after data showed the economy added 106.5K jobs in April – expectations were for an increase of around 10.0K. USD/CAD bottomed out at 1.3380, its lowest level since May 1st.
Consumer prices are due for release on Wednesday.
The Swedish Krona continued its recent downtrend last week, reaching its lowest level against the US Dollar since 2002. The decline in broader risk sentiment prompted by the ongoing US-China trade spat played its part although domestic growth concerns also continue to linger – service PMI and industrial new orders were both soft.
Looking ahead, both unemployment and consumer price data are due tomorrow.
The Norges Bank stood firm on policy last Thursday as was widely expected but gave a clear signal that the policy rate will likely rise at the next meeting in June. The Krone saw a small knee-jerk higher in response although weakened thereafter with EUR/NOK touching a fresh two-month high on Friday at 9.8755 before stronger-than-expected CPI data pulled the pair back below 9.8. The Krone has seen some mild selling pressure this morning meanwhile after Norwegian GDP data came up short of expectations.
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