There were some big moves for the Pound last week in both directions with some notable action on Thursday that left many investors scratching their heads. Against the Dollar, the Pound rose to its best level since September shortly after UK retail sales surprised to the upside, but later in the session saw a 1 cent drop in a matter of seconds amid no clear catalyst. Stops were initially blamed while others suggested the move was Dollar driven amid a flurry of political developments.
Elsewhere, other macro release also lent some support to the Pound this week with CBI Trends (Total Orders) beating expectations on Friday and some solid labour market indicators on Wednesday.
CBI data tomorrow and GDP data on Thursday are the notable releases while election polls will be closely watched after both parties have now released their respective manifestos.
The Euro strengthened last week supported by political developments in France and Germany with signs of increased cooperation between the Euro Zone’s two largest economies. In a press conference on Monday, the respective leaders of each nation pledged to deepen integration and signalled openness to treaty changes.
In the polls, Macron looks set to claim an absolute majority in the parliamentary vote while Merkel continues to lead ahead of the Federal election in September.
Elsewhere, Euro Zone Q1 GDP and April CPI figures were all confirmed at the flash readings and generated minimal reaction. ECB President Mario Draghi spoke on Friday although comments were in line with recent rhetoric.
The US Dollar was broadly lower last week, losing ground against all the other G10 currencies. The Dollar index posted a decline of 2.1% versus the prior Friday’s close and reached its lowest level since November 9th on Friday.
Political developments were the main catalyst for the fall as US President Donald Trump found himself facing calls for his impeachment after only five-months in the job. It began on Tuesday when reports emerged suggesting that he had revealed classified information to Russian diplomats in a meeting last week. This was followed on Wednesday by accusations that he had pressured former FBI Director Comey to drop an investigation into former White House National Security Adviser Flynn.
From a monetary policy standpoint, the chances of a June rate hike have retreated this week amid some mixed macro releases. Empire manufacturing, housing starts and building permits were all soft but were balanced later in the week by a drop in jobless claims and spike in the Philly Fed index.
It was a mostly positive week for the Yen, boosted by safe-haven flows as US President Trump faced calls for his impeachment. Domestic macro releases also provided some support with stronger-than-expected readings for Q1 GDP and industrial production.
BoJ Governor Kuroda was quoted midweek telling PM Abe that they will continue with their ultra-easy policy stance. Deputy Governor Iwata later added that there is no decision on how the BoJ will exit its current monetary policy.
The Swiss Franc was one of the strongest G10 currencies last week, supported by safe-haven flows as US President Trump faced calls for his impeachment. SNB President Jordan did his best to counter the move as he spoke twice to remind investors that the Franc was overvalued. Rating agency S&P also affirmed Switzerland on Friday at AAA with a stable outlook.
It was a mildly positive week for the Australian Dollar, supported mainly by a stabilisation in commodity prices. The RBA minutes on Tuesday prompted some upside after they sounded slightly upbeat on the outlook for core inflation, while a strong labour market report on Thursday lent further support.
It was a mixed week for the Canadian Dollar. Higher oil prices lent some support, especially later in the week, but the risk-adverse trading seen after the political developments in Washington kept any gains in check.
Data wise, we saw a modest softening in the Canadian Dollar following the soft core CPI and mixed retail sales figures on Friday although this was relatively short lived as oil prices climbed to new multi-week highs.
NEW ZEALAND DOLLAR
Another upbeat GDT auction in Tuesday and fresh multi-week highs for crude prices lent some support to the New Zealand Dollar this week. The pair struggled to capitalise however as most risk currencies struggled amid the political concerns emanating from Washington. Data wise, retail sales surpassed expectations on Monday.
The Norwegian Krone strengthened last week, supported by gains in oil prices with US crude futures climbing to a fresh multi-week high on Friday. From a domestic standpoint, Q1 GDP also beat expectation on Monday as consumer confidence also improved.