Sterling fell sharply last week in response to weaker than expected CPI and retail sales data released on Wednesday and Thursday respectively.
GBP/USD reached a two-week low on Friday at 1.3068 before rising into the weekend on positive Brexit headlines, but is on the back foot today amid reports that Prime Minister Theresa May is facing a rebellion, currently at 1.2970 mid-market.
Brexit related headlines will likely be the main focus this week with limited data due for release – CBI tomorrow and mortgage approvals on Wednesday. BoE Governor Carney and Chief Economist Haldane speak tomorrow.
The Dollar Index made a brief appearance above the 96 level on Friday, having found some support from the FOMC minutes released on Wednesday in which some participants suggested rates would need to become modestly restrictive. The index dropped into the weekend and is currently trading flat at around 95.7.
Looking ahead, manufacturing and service PMI prints are out on Wednesday followed by durable goods on Thursday and third quarter GDP on Friday. We also expect comments from FOMC policymakers Evans, Kashkari, Bostic, Bullard, Mester and Clarida.
EUR/USD hit a two-week low on Friday at $1.1433 but rallied into the weekend and reclaimed 1.15 as Italian assets stabilised. “The ECB is likely to take a stern tone on Italy for threatening the unity of the single market. The odds have increased for EUR/USD to break into a lower 1.10-1.15 range for the rest of the year” said Phillip Wee of DBS bank.
The single currency will have welcomed another modest pullback in Italian yields this morning despite negative rating action over the weekend by Moody’s. Investors are now awaiting the Italian response to the EU letter regarding their 2019 budget.
The European Central Bank meet on Thursday where they are widely expected to leave rates on hold. On the data front, Euro Zone consumer confidence is out tomorrow, manufacturing PMI on Wednesday and German IFO on Thursday.
The Japanese Yen was at the mercy of broader risk sentiment for most of last week although we did see some selling after slightly softer CPI data released on Friday. Bank of Japan Governor Kuroda also stuck to his usual dovish rhetoric.
USD/JPY nudged higher this morning to a fresh two-week high at 112.78 with demand for the perceived safe-haven currency limited after a positive European open.
Looking ahead, manufacturing PMI is out on Wednesday followed by Tokyo CPI on Friday.
EUR/CHF made a brief appearance above the 1.15 level this morning, the first time it has done so since August 9th. The Franc is also trading close to a two-month high versus the Greenback with diverging policy guidance from the SNB providing a weight.
A quiet week macro wise with only ZEW data due on Wednesday to look forward to.
AUD/USD touched a fresh one-week low at the open overnight at 0.7088 with the Australian Dollar weakening amid the prospect of a hung parliament after the Sydney by-election.
Domestic jobs data released last week offered some mixed impulses and prompted only a modest uptick in the currency while weak Chinese GDP had the opposite effect.
Data releases are sparse this week but we do expct comments from RBA policymakers Boulton, Bullock and Debelle.
The Canadian Dollar hit its lowest level versus the Greenback since September 11th on Friday after weaker-than-expected CPI and retail sales data – USD/CAD hit a high of 1.3134. The pair has slipped back below the 1.31 level earlier today however as a modest uptick in crude prices offers some support.
Investors will now be looking ahead to Wednesday’s Bank of Canada meeting where policymakers are expected to vote for a twenty-five basis point rate increase.
NEW ZEALAND DOLLAR
The New Zealand Dollar finished Friday as one of the stronger G10 currencies and touched a fresh three-week high versus the Greenback in the early exchanges overnight at 0.6618. Gains were short lived however with the New Zealand Dollar losing ground through the Asian/European crossover and falling back below the 0.66 level.
Looking ahead, figures are out on Wednesday.
The Riksbank meet on Wednesday although most economists see this as a non-event as prior guidance has suggested no move in rates this month. Instead, investors will be looking for clues as to whether the repo rate is more likely to rise in December of February.
EUR/SEK broke below 10.3 on Wednesday to a three-week low but this proved short lived.
On the data front, consumer confidence and PPI figures are out Thursday followed by retail sales and trade data on Friday.
The Norges Bank meet on Thursday although no fireworks are expected with rates seen on hold after September’s hike. Policymakers are also expected to maintain their guidance that suggests the next increase will occur in the first quarter of next year.
Domestic impulses for the Krone were limited last week with investors taking some cues from the pullback in oil prices.
EUR/NOK hit a one-week high on Friday at 9.4943 and has begun this week little changed at just above 9.46.
Besides the Norges Bank, unemployment data is also due on Thursday.
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