Sterling experienced volatility last week, prompted by the UK officially starting the process of their withdrawal from the European Union. The pound was under pressure early in the week amid nerves ahead of the formal triggering of Article 50 and the Scottish parliament voting in favour of a second independence referendum. However, a sharp recovery move took hold after the Brexit process officially started as investors appeared to have welcomed the certainty that Brexit is going to happen.
We also heard from rating agency S&P who noted that there were no surprises from the UK government as they triggered Article 50, adding that PM May was more conciliatory than she could have been. They said they saw nothing to prompt a rethink of the negative outlook.
For the week, Sterling gained 0.6% against the US Dollar, 2% against the Euro and 0.7% against the Yen.
Looking ahead, UK PMI Manufacturing forecast at 55.1 will likely keep Sterling supported while Brexit related news remains in focus.
We saw a broadly negative start to the week for the US dollar as investors reacted to the previous Friday’s news that the Trump administration had been forced to pull the healthcare bill. However, the Greenback found some momentum as the week progressed, supported by hawkish Federal Reserve officials who showed further support for multiple rate increases this year.
Upbeat US economic data releases also likely played their part, with a near seventeen year high for consumer confidence coupled with an above estimate fourth quarter GDP revision and firmer inflation metrics.
For the week, the US dollar added 1.2% against the Euro and 0.04% against the Yen although did lose 0.4% against the Pound. The Greenback also managed to advance against the Skandis.
Looking ahead to this week, the US Dollar will be kept busy starting today with ISM manufacturing PMI and construction spending along with speeches from Federal Reserve officials Dudley and Harker.
The main event risks for the week have to be the FOMC Minutes on Wednesday and the Nonfarm Payrolls report on Friday.
It was a disappointing week for the Euro. The single currency found some modest upside on Monday after stronger than expected German IFO data, some hawkish ECB chatter from Sabine Lautenschlaeger and victory for German Chancellor Merkel in the Saarland state election.
However, source reports showing ECB policymakers thought the market overreacted to perceived hawkish early-March guidance and some subdued inflation readings for the Eurozone, which is seen helping the ECB to maintain its negative interest rate policy and ongoing QE, saw the Euro lose ground to most of its G10 peers. For the week, the Euro lost 1.2% against the US dollar, 1.9% against the Pound and 1.3% against the Yen.
Looking ahead, the French election remains in focus this week and incoming polls will be closely watched to see if Emmanuel Macron can extend his lead. Manufacturing PMI’s due later today may also prompt some reaction in the Euro while central bank speakers will also be in focus.
The Australian dollar was firmer against most of the majors last week, underpinned by upbeat Chinese manufacturing data and rising commodity prices. The currency added 0.1% against both the US dollar and the Yen last week and 1.2% against the Euro. Meanwhile, tomorrow’s RBA decision will be the main focus this week.
The Canadian Dollar rose against the major pairs last week, bolstered by higher commodity prices. Some comments from Bank of Canada Governor Poloz were also in focus but prompted minimal reaction as he opted not to address monetary policy in his opening remarks. He later warned that raising rates prematurely would cause a recession in Canada.
For the week, the Canadian dollar added 0.4% against the US dollar, 0.5% against the Yen and 1.6% against the Euro. Ahead, volatility in the currency may pick up at the end of the week with Canadian employment data on tap.
The Swedish Krona was mixed against the majors last week following the release of retail sales and PPI data. Retail sales were a touch softer month-on-month but beat forecasts year-on-year while there was an upward revision to last month. The trade balance also slipped back to flat. For the week, the Krona rose against the Euro but lost around 1.8% against the US dollar.