The pound was little changed for the most part last week. Losses seen on Wednesday were reversed on Thursday and Friday after UK GDP was confirmed at the flash readings of +0.3% Q/Q and +1.7% Y/Y.
Brexit impulses were limited although the UK government did state on Monday that they were confident they will have made enough progress by October to take the talks to the next stage. The EU’s chief negotiator Michel Barnier is concerned about the lack of progression though. He warned that UK ambiguity must be removed and progress on separation issues must be made before any talks on the future EU-UK relationship.
For the week, the pound gained 1% against the US Dollar and 0.4% versus the Japanese Yen but lost 1.4% versus the Euro.
The Euro was one of the strongest G10 currencies last week. The single currency got off to a strong start after a German Bundesbank report suggested economic growth may exceed their current forecast. Other data impulses were mixed meanwhile with Euro Zone manufacturing PMI surpassing expectations and service PMI coming up short.
The highlight of the week however came late on Friday as ECB Chief Mario Draghi gave his eagerly awaited Jackson Hole speech. The Euro rose when his initial remarks did not mention the outlook for monetary policy. He went on to call for patience and said significant monetary accommodation is still needed as inflation is not yet converging towards their target.
The US Dollar softened against most of the G10 currencies last week. The largest daily decline came on Friday after Fed Chair Yellen made remarks at the Jackson Hole Summit but chose not to address the outlook for US monetary policy. Instead, she launched a staunch defence of regulations put in place since the financial crisis, arguing that they have made the system safer and contributed to today’s strong economy.
Earlier in the week, US President Trump provided a weight on the Greenback after he suggested he was willing to shut down the government in order to fund the border wall with Mexico.
Risk assets soured overnight following the North Korean missile launch. The Dollar Index has fallen to its lowest level since May 2016 as US yields also fell. Investors are also contemplating the economic impact of Hurricane Harvey and how this could impact the Fed’s thinking towards year end.
The Japanese Yen was flat for the most part last week. Gains were seen at the start of the week after the Reuters Tankan Index hit a seven year high. Safe haven flows were also evident after the US-South Korean military drills held over the weekend seemingly irked the North Korean government.
Japanese manufacturing PMI on Wednesday provided further support but losses followed towards the end of the week as risk sentiment improved ahead of the Jackson Hole summit. CPI was in line on Friday at +0.4% year-on-year and prompted minimal reaction.
The Swiss Franc was one of the quieter G10 currencies last week. A risk off start to the week provided some support as North Korean tensions grew over the weekend after the US and South Korea conducted military drills in the region.
The trade surplus widened to Chf3.51 Bln while industrial orders rose +2.8% in the second-quarter and prompted minimal reaction.
The Australian Dollar gained against most of the G10 currencies last week. Moody’s offered some supportive comments on Thursday as they reiterated the AAA rating.
Higher metal prices also played their part while lower oil prices will have had the opposite effect on the commodity currency as US crude futures lost two-percent for the week.
The Canadian Dollar saw a modest gain on balance last week. Retail sales (ex.transport) beat expectations on Tuesday and provided some support although oil prices had the opposite effect on the commodity currency.
NEW ZEALAND DOLLAR
The largest daily decline came on Wednesday following the pre-election ‘Economic & Fiscal Update’ which saw lower growth and smaller surplus forecasts.
On a positive note, the New Zealand Dollar saw some modest upside after the trade surplus posted a surprise surplus in July.
The Swedish unemployment rate ticked up on Thursday but this was countered by stronger government growth forecasts. The Krona then found some further upside on Friday after a healthy household lending growth number and pick up in producer prices.
The Norwegian Krone was one of the strongest G10 currencies last week, supported by a batch of solid macro releases. Consumer confidence rose in Q3, the unemployment held steady at a healthy 4.3%, and GDP surprised to the upside on Thursday at +0.7% Q/Q (f/c. +0.6%).