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Market News – 20 November 2017

STERLING

Sterling softened against most of the major currencies last week. The currency began the week on the back foot after a Times article suggested that 40 Conservative MP’s are calling for Prime Minister Theresa May to step down – this number is 8 short of the amount required to trigger a leadership challenge.

Weaker-than-expected CPI data on Tuesday and the drop in employment reported on Wednesday provided a further weight but were balanced out to some extent by the solid retail sales report released on Thursday.

Elsewhere, Bank of England rhetoric was largely in line with the recent minutes while Brexit related headlines took a positive turn on Friday – EU Council President Tusk said he feels safer after meeting with Theresa May. He added that good will is visible on both sides and there is still a chance to move onto next phase in December.

For the week, the pound gained 0.2% versus the US Dollar but lost 1.0% versus the Euro and 1.2% versus the Yen.

EURO

The Euro saw a modest strengthening on balance last week. The single currency got off to a strong start and saw strong gains on Tuesday after German third-quarter GDP surprised to the upside.

Euro Zone CPI figures were out on Wednesday but prompted minimal reaction as both the headline and core prints were unrevised from the flash readings.

ECB speakers were also in abundance although there were no real standout comments. On Friday, President Mario Draghi said they have increasing confidence that the recovery is robust and that this momentum will continue going forward. He did add that we are not yet at a point where the recovery of inflation can be self-sustained without accommodative policy.

US DOLLAR

The US Dollar put in a mixed showing last week although the bias was to the downside with the ‘Dollar Index’ losing 0.9%.

Tuesday was the weakest day for the Greenback despite higher-than-expected readings for US PPI in October.

Comments from St Louis Fed Governor Bullard likely provided a weight as he noted that US inflation data has surprised to the downside this year.

We saw modest support appear on Wednesday after US retail sales and CPI data posted minor upside beats.

The Dollar ended the week on the defensive however after news that Special Counsel Robert Mueller had issued a subpoena to at least 12 officials from Trump’s election campaign.

JAPANESE YEN

The Japanese Yen was the strongest G10 currency last week. Wednesday saw a decent gain across the board after Japanese third-quarter GDP surprised to the upside.

The Yen also finished the week on a firm footing as perceived safe-haven assets gained across the board on weaker equities, North Korean concerns and the latest special counsel probe into the Trump election campaign.

SWISS FRANC

The Swiss Franc was mixed last week. Comments from SNB President Jordan fell on deaf ears Wednesday as he repeated the view that the Swiss Franc is still highly valued while negative rates and currency interventions are still appropriate. Board members Maechler and Moser offered a similar outlook on Thursday.

AUSTRALIAN DOLLAR

The Australian Dollar weakened last week. It got off to a slow start on Monday after RBA Governor Debelle warned that wage growth could stay lower for longer.

Stronger NAB business confidence data offered some minor support on Tuesday but this was swiftly countered by weak Chinese retail sales and industrial production.

Weak wage data provided a further weight on Wednesday although we did see some support on Thursday after the Australian employment report showed gains in full-time employment despite a weaker headline figure.

CANADIAN DOLLAR

The Canadian Dollar weakened last week, taking a sharp drop on Friday despite Canadian CPI figures meeting market forecasts. Analysts pointed to the lack of a hawkish surprise and when coupled with recent Bank of Canada rhetoric, pointed to a continued dovish policy stance.

Deputy Governor Wilkins spoke on Wednesday and said over time, he thinks less monetary stimulus will be appropriate but will be cautious about it, adding inflation is always extremely important and it’s their only priority.

NEW ZEALAND DOLLAR

The New Zealand Dollar weakened last week, as did most of the perceived risker currencies.

Weaker Chinese retail sales and industrial production provided a weight on Tuesday, as did soft ANZ consumer confidence data on Thursday.

SWEDISH KRONA

The Swedish Krona weakened last week as concerns over weaker house prices continues to weigh.

Soft CPI figures released on Thursday provided a further weight, as did the modest uptick in the unemployment rate on Thursday.

NORWEGIAN KRONE

A sharp decline in oil prices on Tuesday and Wednesday provided a weight while the stronger-than-expected third quarter GDP data was largely ignored.