Sterling finished last week on the front foot, deriving support from hawkish Bank of England and favourable Brexit rhetoric. Ian McCafferty, a known hawk, said on Wednesday that they should not dally when it comes to tightening policy.
EU Brexit Minister Michel Barnier meanwhile signalled that they could show some more flexibility with regards to the timing on agreeing the terms of transition. The pound is in for a busy week ahead with unemployment data due tomorrow, inflation on Wednesday and retail sales on Friday.
The Dollar Index fell to its lowest level in two-weeks last Wednesday, weighed by rising geopolitical and trade tensions. The weak March payrolls data from the prior Friday will also still be in the back of investors’ minds. The Greenback then found some support from the FOMC minutes which took a slightly more hawkish tone than had been anticipated. Boston Fed President Rosengren added to the upside on Friday where he signalled his support for at least three more rate increases this year.
The Dollar Index has begun this week with a minor dip. On the data front, US retail sales are due later today while housing data and industrial production follow tomorrow. Fed speakers are also in abundance with Bostic, Quarles, Williams, Dudley, Mester and Evans all due to speak this week.
The Euro slipped last week following the releases of the minutes from the ECB’s March policy meeting. Policymakers stressed that prudence, patience and persistence was still required in their approach to monetary policy as inflation was yet to show sufficient evidence of a sustained adjustment towards their target.
Wednesday’s CPI data will therefore be closely watched with the headline rate seen steady at +1.4% YoY and core at +1.0%.
The Japanese Yen finished last week as one of the weakest G10 currencies, losing notable ground on Thursday and Friday as rhetoric surrounding the US-China trade dispute turned more friendly. Weakness was also attributed to the more measured approach seemingly taken by US President Trump to Syria towards the end of the week.
Comments from BoJ Governor Kuroda were largely ignored as he repeated that they will continue with powerful QE to meet the inflation target. He added that the economy is improving but her are still some distance from the 2% price target.
Looking ahead, we await industrial production, trade data and Tankan manufacturing data this week.
The Swiss Franc suffered a similar fate to the Japanese Yen last week, losing ground as risk sentiment improved towards the weekend. Domestic impulses were limited besides the unemployment rate which was unchanged in March at 2.9% as expected.
PPI data release this morning is the only notable macro release this week and came in below forecasts.
The Australian Dollar rose last week, as did most of the commodity-related currencies as oil prices rose around eight-percent versus the prior Friday’s close. The broad improvement in risk sentiment we saw into the weekend will also have provided support, especially related to the US-China trade dispute.
Looking ahead, the minutes from the latest RBA policy meeting are out tomorrow while employment figures follow on Thursday.
The Canadian Dollar rose last week, along with the other commodity currencies as oil prices added around eight-percent versus the prior Friday’s close. NAFTA negotiations are progress well according to White House adviser Kudlow while an upbeat Bank of Canada Senior Loan Officer Survey also provided some support.
NAFTA headlines remain in focus for investors this week although the Bank of Canada rate decision on Wednesday could draw more attention followed by CPI data due on Friday.
NEW ZEALAND DOLLAR
The New Zealand Dollar continued its recent run higher last week, supported by rising oil prices and the improvement we saw in risk sentiment in the final few sessions. Domestic impulses were mixed; electronic retail sales beat expectations but the BusinessNZ PMI print dropped in March.
CPI figures due on Wednesday will be the main focus this week.
The Swedish Krona weakened across the board last week, losing notable ground on Thursday after CPI figures came up short of expectations. The Riksbank’s Floden did say on Friday that there are not trying to work for a weaker Krona. Swedish macro releases are absent this week.
Weaker-than-expected CPI data pushed the Norwegian Krone lower last Tuesday, but gains followed last in the week, supported by rising oil prices. Norges Bank Governor Olsen also reminded investors that the first rate increase is drawing close, adding that rates will rise after the summer. The Norwegian trade surplus rose this morning while industrial confidence follows on Friday.
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