Sterling was one of the stronger G10 currencies last week as both sides of Brexit negations took on a more constructive tone than in recent weeks.
An increased divorce bill offer from the UK government appears increasingly likely and will hopefully unlock the next phase of talks – EU Commission President Juncker sounded confident on such a development when questioned by reporters on Friday.
The Autumn Budget was also in focus and the pound fell after the OBR drastically reduced their GDP forecasts for the years ahead.
Data wise, GDP was confirmed at the prior readings of 1.5% while the CBI retail report saw a recovery, beating expectations of +3% with +26%.
For the week, the pound gained 1.1% versus the US Dollar, was down 0.6% against the Euro and 0.4% versus the Yen.
The Euro strengthened last week, supported by broadly stronger data from the Euro Zone – manufacturing and service sector PMI surprised to the upside on Thursday followed by a record high for German IFO on Friday.
The Euro was also boosted by renewed optimism surrounding the prospects of a grand coalition in Germany with meetings between the CDU/CSU and SPD leadership planned for Thursday.
The US Dollar fell across the board last week with the Dollar Index losing one-percent and hitting its lowest level since late September.
A cautious tone from Fed Chair Yellen regarding inflation set the Dollar on a downward trend late Tuesday and this was amplified on Wednesday as the FOMC minutes also sounded some concern over the prospects for prices.
Weak durable goods on Wednesday and soft PMI data on Friday also provided a weight on the Greenback.
The Japanese Yen was mixed last week but ended the week on the back foot as risk sentiment improved on renewed optimism surrounding the prospects of a grand coalition in Germany. The pair was also pressured on Monday after trade data came in soft with both imports and exports below forecasts.
Manufacturing PMI did hit its highest level since March 2014 on Friday but prompted minimal reaction.
The Swiss Franc saw a modest strengthening last week although ended on a soft note as perceived safe-haven assets dropped on Friday. This followed renewed optimism surrounding the prospects of a grand coalition in Germany.
Closer to home, SNB President Jordan spoke on Thursday and his comments were largely ignored as he repeated that the Franc remains highly valued.
The Australian Dollar saw a modest strengthening last week. The currency was underpinned by gains in crude prices with US crude futures hitting a fresh two-year high on Friday and adding almost four-percent for the week.
The RBA minutes released on Tuesday provided a weight as officials warned there was “considerable uncertainty” around when and how quickly wage pressures might emerge and about how much these would add to inflationary pressure.
However, comments from RBA Govenor Lowe pushed the Aussie Dollar higher as he argued that it is more likely the next move in rates will be up rather than down.
Data also provided support with construction work soaring +15.7% in Q3.
The Canadian Dollar was mixed last week, underpinned by gains in crude prices with US crude futures hitting a fresh two-year high on Friday and adding almost four-percent for the week.
Domestically, the Canadian Dollar softened after September retail sales fell short of expectations while a lack of progress in recent NAFTA negotiations will also have provided a weight.
The Swedish Krona strengthened last week although it got off to a soft start as it tumbled to a fresh one-year low versus the Euro on Tuesday.
Concerns surrounding the housing market have pressured the Krona in recent weeks, but the Swedish currency bounced back after Finance Minister Jochnick sought to ease concerns. She said that she does not expect to see a large fall in prices, and stressed that inflation was still “quite near” the bank’s forecasts. She also noted that the recent weakening of the Swedish Crown is probably a temporary effect.
The Norwegian Krone strengthened last week on the back of gains for oil.
Domestically, the unemployment rate fell in September to 4.0% from 4.1% which would have provided further support.
The Krone has been under pressure of late amid fears of a housing correction, but PM Solberg said on Monday she was not concerned by the weak exchange rate.