Sterling was one of the strongest G10 currencies last week. The UK currency began the week on the front foot after optimistic remarks from UK Prime Minister Theresa May regarding Brexit and comments from US Commerce Secretary Ross on the prospects of a free-trade deal between the two countries.
Further political baggage attached to Sterling on Wednesday after EU parliament negotiator Verhofstadt said there are still major issues to be resolved on safeguarding citizens’ rights after Brexit. He added that they did not recognise reports that a deal on citizens’ rights is almost finalised.
Sterling finished the week on a strong note however after UK industrial and manufacturing production surprised to the upside on Friday. Attention was also paid to reports that the PM is ready to increase the £20 Bln Brexit divorce offer.
For the week, Sterling gained 0.9% versus the US Dollar, 0.4% versus the Euro and 0.5% versus the Yen.
The Euro was lacking in direction somewhat last week. The single currency gained on Thursday after the European Commission hiked their growth forecasts for the bloc, predicting the fastest pace of growth in a decade this year.
There was brief support on Wednesday after a sources report suggested three ECB policymakers wanted to change the Governing Council’s commitment to continue buying bonds until inflation improves. Weidmann, Coeure and Villeroy are said to have recommended tying the overall level of monetary stimulus, rather than just asset purchases, to the outlook for prices.
The US Dollar weakened against all of the other G10 currencies last week with the Dollar Index losing 0.5% and hitting a two-week low on Friday.
US tax reform was the main focus for investors and the Greenback fell on Thursday as the Senate offered their tax reform bill and proposed a delay in reducing the corporate tax rate until 2019.
Commentators have since raised concerns that the two sides of Congress will be unable to bridge the differences between their two proposals before Christmas.
Other impulses were largely ignored with comments from FOMC officials in line with recent rhetoric although San Francisco President Williams did put forward a case for price level targeting.
Data wise, Michigan Sentiment saw a notable pullback on Friday.
The Japanese Yen was little changed on balance last week. The Bank of Japan minutes released on Monday failed to prompt much reaction although comments from Kuroda regarding an inflation overshoot did weigh slightly.
Support came in during the middle of the week as the equity sell off gathered pace with attention paid to the sizeable swing lower in the Nikkei. The same theme occurred on Friday as the equity decline continued into the weekend.
The Swiss Franc saw a modest strengthening last week. Safe-haven flows were the main driver as global equity markets were dragged lower by US tax reform uncertainty.
Domestically, SNB President Jordan offered few surprises as he repeated his view that negative rates are still needed and said the Swiss Franc is still highly valued. Both CPI and unemployment figures were in line with forecasts.
The Australian Dollar softened for the most part last week. The Australian currency dropped on Tuesday despite the modest bid seen after RBA decision to leave the benchmark rate on hold. Staying with the RBA, we saw further downward pressure on Friday after they downgraded their inflation outlook.
Data wise, Aussie home loans posted a surprise drop in September and provided a weight, as did weaker-than-expected Chinese trade data.
The Canadian Dollar strengthened last week, albeit modestly, supported by a gain of over two-and-a-half percent in US crude futures.
Canadian IVEY PMI surprised to the upside on Monday and will also have provided support. Bank of Canada Governor Poloz meanwhile repeated they view that while the economy is likely to require less monetary stimulus over time, they will be cautious in making future adjustments to the policy rate.
NEW ZEALAND DOLLAR
The New Zealand Dollar strengthened last week. We saw a gain on Tuesday after Finance Minister Robertson outlined review of RBNZ act in which the act will include maximising employment as a goal, while also including a committee-based decision-making model.
Further upside was seen on Thursday after the RBNZ voted to keep the benchmark rate on hold and brought forward their forecast for the first rate increase to Q2 2019 from Q3 2019.
There was a brief drop on Friday however after Robertson said one of the impacts of the RBNZ dual mandate could be looser policy in certain situations.
The Swedish Krona strengthened last week, supported by hawkish remarks from Riksbank Deputy Governor Skingsley who said on Tuesday that the room for manoeuvre in monetary policy has increased as inflation and expectations are near target. He also suggested that they should stop following the ECB’s monetary policy.
Data wise, industrial production figures also surprised to the upside on Monday.
The Norwegian Krone was little changed on balance last week although the bias was to the upside. Higher oil prices underpinned the Krone from the outset with US crude futures adding three-percent on Monday. On Friday, headline CPI fell short of expectations but was balanced by stronger-than-expected core CPI figures.