The Pound was mostly firmer last week, aided by a higher than expected headline CPI number while average earnings also rose. The Pound gained 1.2% against the Dollar and 0.9% against the Euro but lost 1.1% against the Yen.
Newswires were quiet on Brexit to the benefit of the Pound, with little colour on how the negotiations will pan out, with the first port of call being the exit payment, but news was limited on this last week.
The House of Commons returns today from its recess at the end of March, while Friday’s UK retail sales will shed some light on how households are faring with exchange rate related price hikes.
It was a mostly softer week for the Euro. The single currency lost 0.9% against the Pound and 2.1% against the Yen but gained 0.2% against the Dollar.
The Euro struggled to gain any traction last week given the uncertainty over the French elections, with the waters muddied by the emergence of far-left candidate Melenchon suggesting Euro risk premium is still moderate. A solid German ZEW outcome and HICP forecast unchanged at 0.1% month on month with the year on year at 1.5% proved to be of little help.
Looking ahead, nervousness will continue ahead of the French elections. Meanwhile, pan-Eurozone inflation numbers are due out tomorrow, alongside the latest trade figures, while German and EU manufacturing PMIs are due on Friday.
The US Dollar moved lower against most of the majors last week, with increased demand for safer US Treasuries, dragging yields lower. President Trump added some fresh volatility late Wednesday as markets reacted to his comments that the Dollar was getting too strong.
The USD Index – which had swung off session lows on reports that Trump and Chinese President Xi Jinping had had a “very good call” regarding North Korea and the Tillerson/Lavrov meeting was deemed productive – swung into negative territory.
This week’s schedule stateside offers little of material significance to dislodge expectations on the current Fed rate hike profile. Plenty of manufacturing data through the week, including the national manufacturing production today, Philadelphia Fed on Thursday and PMIs Friday.
The Yen was broadly higher last week as political tensions in both North Korea and Russia/Syria lingered, precipitating a flight to safe-haven assets.
Global tensions have been heightened by the US airstrikes in Syria this week, and with US Secretary of State Tillerson trying to find some common ground with Russia, the friction with North Korea adds to investor caution. Data out of Japan last week saw core machinery orders rise in February by 1.5% but less than expected – year on year was higher at 5.6%. March PPI year on year was up a touch to 1.4%, with bank lending also rising slightly.
Nevertheless, the Bank of Japan Governor Kuroda remains comfortable continuing with the expansion of the monetary base according to his recent comments.
Looking ahead, geopolitical concerns will remain in focus this week, while tomorrow we have Japanese trade and on Thursday manufacturing PMIs.
The Australian Dollar was one of the better performing G10 currencies last week, gaining 1.2% against the Dollar and 0.8% against the Euro.
The Aussie Dollar was firmer after the stellar domestic jobs report which showed a much larger gain in March employment at 60.9k versus 20k expected, and Chinese trade data which beat expectations.
Looking ahead, the RBA minutes are the only domestic focus for Aussie traders this week.
Politics continued to dominate FX last week and the global tensions favoured buying/holding the Swiss Franc. As such, the currency gained ground against most of the majors last week.
The Canadian Dollar was mostly higher last week after the BoC decision which saw the central bank err on the hawkish side. The Bank of Canada left rates unchanged as was widely expected. However, the focus was on the accompanying statement, where the central bank brought forward their forecast on closing the output gap to H1 2018. This week, all eyes will be on Canadian inflation on Friday.
NEW ZEALAND DOLLAR
The New Zealand Dollar was led higher by the Australian Dollar this week, gaining 0.9% against the US Dollar and 0.8% against the Euro. Looking ahead, another GDT auction is on this week’s agenda.