Market News – 12 February 2018


Sterling was one of the weakest of the G10 currencies last week. The currency got off to a slow start after UK service PMI wrapped a trifecta of weaker-than-expected PMI releases. There was also chatter in the weekend press that UK Prime Minister Theresa May will face a possible coup.

Focus then turned to ‘Super Thursday’ where the pound rallied after the Bank of England took a hawkish turn and warned that monetary policy would need to be tightened somewhat earlier and by a greater extent than anticipated at the time of the November report.

Heavy losses followed on Friday however as UK industrial production and trade figures came up short of expectations and EU Brexit Minister Barnier warned the UK needs to accept all EU terms during the transition period, adding if differences persist a transition is not given.

For the week, Sterling lost 2.2% versus the US Dollar, 0.3% versus the Euro and 3.3% versus the Yen.

Data wise, producer and consumer price index figures will be released tomorrow morning along with retail sales on Friday.


Expectations that the ECB is moving towards an unwind of its stimulus measures continue to weigh on the single currency although German coalition talks also appear to be heading in the right direction.

On the data front, Euro Zone composite PMI was revised higher on Monday while German factory orders also surprised to the upside. Later in the week, the EU Commission raised their forecasts for Euro Zone growth and inflation for the years ahead.


The US Dollar was among the strongest G10 currencies last week, surpassed only by the Japanese Yen.

The Dollar Index climbed 1.4% versus the prior Friday close. Investors had one eye on Washington for most of the week and welcomed the successful conclusion to the budget negotiations as Congress approved a two-year agreement that will boost spending by $300 Bln.

At the Federal Reserve, officials downplayed the recent market volatility and insisted it had not changed the outlook for the economy. With regards to policy, three hikes in 2018 appears to be the consensus although Neel Kashkari offered his usual dovish verbiage.


The nosedive in global equity markets was the main catalyst for gains as safe-haven assets rallied across the board amid the spike in volatility. It was not all one-way traffic however and the Yen lost ground on comments from Bank of Japan Governor Kuroda who on Tuesday ruled out the possibility of a near term rate increase, and on Thursday said they are still distant from the two-percent inflation target and it is too early to be talking about the specifics of an exit strategy.


The Australian Dollar weakened last week. The main focus was on the RBA policy decision on Tuesday where rates were kept on hold but officials were downbeat on wage growth and inflation.

Soft trade figures and retail sales also provided a weight. Heavy losses were seen on Thursday meanwhile after RBA Governor Lowe said he does not see a strong case for a near term adjustment in rates.


The big move came on Friday as the currency was whipsawed by January’s jobs data – employment slumped a sizeable 88K while the unemployment rate ticked up to 5.9% from 5.7% but also saw an acceleration in wages.

Losses were seen on Wednesday after Canadian PM Trudeau said they will not accept a win-loss NAFTA deal and that no NAFTA agreement may be better than a bad deal.


The New Zealand Dollar strengthened last week, despite a notable drop on Wednesday following the RBNZ policy decision. The benchmark OCR was left on hold at 1.75% and the statement said they assume the New Zealand Dollar will weaken over the forecast horizon.

Inflation forecasts were cut and they now do not expect prices will reach the 2-percent midpoint of its 1-3 percent target range until late 2020, more than two years later than previously expected.


The Swedish Krone weakened last week as perceived riskier currencies struggled in the risk adverse trading environment. Domestically, service PMI slowed in January to 61.3 from 64.6 and industrial production figures also rose at a slower pace.


The Norwegian Krone was the weakest of the G10 currencies last week as perceived riskier currencies struggled in the risk adverse trading environment. The Krone took a further knock on Friday after Norwegian GDP came up short of forecast and CPI fell MoM in January. Heavy losses in oil prices will also have provided a weight as US crude futures lost over nine-percent for the week.