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Deal or No Deal?

STERLING

Last week’s Bank of England rate decision and inflation report provided no real surprises although the Pound still finished the day sharply higher on Brexit optimism – reports suggested that UK Prime Minister Theresa May had reached a deal with the EU over financial services although this was later denied.

GBP/USD hit a fresh two-week high earlier this morning at 1.3065 but has since fallen back to 1.30. Service PMI also missed expectations today coming in at 52.2 against forecasts of 53.3 adding to the downside pressure.

Looking ahead, data releases are sparse ahead of Friday’s barrage which includes GDP, industrial production and trade figures.

US DOLLAR

The Dollar Index rose to its best level since June 2017 on Wednesday at 97.20, boosted by suspected month-end demand but fell back sharply on Wednesday on weaker data and improved risk sentiment.

Upbeat jobs data provided some support on Friday although this was balanced by pessimism from White House Economic advisor Larry Kudlow regarding US – China trade talks.

The FOMC policy meeting on Thursday will be the main focus for investors this week although it may prove a non-event with little expectation of any change in policy.

On the data front, Markit service PMI and ISM non-manufacturing are out later today, JOLTS tomorrow and PPI on Friday.

EURO

EUR/USD found some support just above 1.13 last week before topping out at a seven-session high on Friday at 1.1456.

Stronger-than-expected Euro Zone CPI data provided support on Wednesday although weakness was seen on Friday after a sources report suggested the ECB are considering targeted longer-term refinancing operations (TLTRO).

Sentix investor confidence disappointed this morning which pushed EUR/USD to a fresh daily low of 1.1354.

Looking ahead, Euro Zone service PMI is out tomorrow followed by retail sales on Wednesday.

JAPANESE YEN

The Japanese Yen remains at the mercy of broader risk sentiment with little reaction shown to the relatively mundane Bank of Japan rate decision last week. USD/JPY reclaimed the 113 handle on Friday and has picked up just above Friday’s close this morning.

Wage data and core machinery orders are out on Wednesday.

SWISS FRANC

The Franc had weakened on improved risk sentiment early in the week but found some upside on hawkish SNB commentary which overshadowed the weaker Swiss CPI print.

Looking ahead, SNB board member Zurbruegg speaks on Wednesday ahead of unemployment data on Thursday.

AUSTRALIAN DOLLAR

The Australian Dollar rose versus the US Dollar last week, with the bulk of gains coming on Thursday after stronger-than-expected Aussie trade data and talk of improving US – China trade relations. The pair topped out on Friday at a five-week high of 0.7260 before pulling back as White House Kudlow poured cold water on the US – China trade optimism.

The RBA meet tomorrow where they are widely expected to keep the benchmark rate on hold at 1.50%.

CANADIAN DOLLAR

There were some mixed impulses for the Canadian Dollar last week with stronger-than-expected GDP and unemployment data countered by ongoing weakness in oil prices. USD/CAD reached a seven-week high on Wednesday at 1.3172 but is now trading below 1.31.

Building permits are out tomorrow and IVEY PMI on Wednesday.

NEW ZEALAND DOLLAR

The New Zealand Dollar shot higher on Thursday. NZD/USD topped out at 0.6690 on Friday, its best level since September 26th. The Dollar has edged higher this morning despite warnings from the New Zealand Treasury overnight that weak confidence is a downside risk to growth forecasts.

Looking ahead, employment figures are out on Wednesday followed by the RBNZ on Thursday who are expected to leave the OCR on hold.

SWEDISH KRONA

After a soft start, the Swedish Krona finished last week on the front foot supported by stronger-than-expected manufacturing PMI data and an improvement in risk sentiment. USD/SEK briefly broke below the 9.0 level on Friday for the first time since October 23rd.

Swedish service PMI edged lower this morning but was largely ignored while industrial production data follows tomorrow.

NORWEGIAN KRONE

The Norwegian Krone hit its lowest level versus the US Dollar since September 10th on Wednesday but rose thereafter, supported by stronger-than-expected PMI data and the improvement in risk sentiment. Norges Bank Governor Olsen also reiterated that rates will most likely be raised in the first-quarter.

Manufacturing production data is out on Wednesday followed by CPI and PPI on Friday.

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