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Market News – 29 January 2018

STERLING

Sterling saw a modest strengthening on balance last week. The currency got off to a strong start on Monday after French President Emmanuel Macron suggested the UK could get a special trade deal with the EU post-Brexit.

Further upside was seen on Wednesday after UK labour market data came in better-than-expected with a sizeable jump in employment, hitting a joint high since records began in 1971 with the number of people employed at 75.3%. UK Q4 GDP was also a touch stronger than expected on Friday.

For the week, Sterling gained 2.1% versus the US Dollar, 0.4% versus the Euro and 0.1% versus the Japanese Yen.

Data is light from the UK this week with only consumer credit (today) and construction PMI (Friday) of note. Governor Carney will be speaking on Tuesday afternoon.

EURO

The Euro fell against most of the G10 currencies last week. The focus for investors was Thursday’s ECB policy meeting where the Governing Council stood pat on policy.

The Euro gained during the press conference however as President Mario Draghi did little to talk down the Euro and offered a fairly optimistic view of the economic outlook.

Eurozone GDP and consumer confidence (tomorrow) and CPI (Wednesday) are the key data releases of the week.

US DOLLAR

The US Dollar fell sharply last week, losing ground against all of its G10 rivals while the Dollar Index shed 1.7% versus the prior Friday’s close.

The bulk of declines came on Wednesday after US Treasury Secretary Mnuchin said a weak Dollar is good for the US as it related to trade and opportunities.

The global reserve currency saw brief reprieve after US President Trump said his comments were taken out of context and he expects the US Dollar will get ‘stronger-and-stronger.’

Losses followed on Friday however after US fourth-quarter GDP came up short of expectations at +2.6% against a forecast of +3.0%.

Wednesday brings us the Federal Reserve’s interest rate decision and monetary policy statement with no change expected in rates. ISM Manufacturing data on Thursday and the unemployment rate on Friday bring the week to a close.

JAPANESE YEN

The Japanese Yen strengthened last week. Gains were seen on Tuesday after the Bank of Japan policy decision where Governor Kuroda played down the recent strength of the Yen and officials offered a slightly more hawkish tone on inflation.

Kuroda then prompted another Yen climb on Friday while speaking at Davos as he offered another round of optimistic comments, pointing out that wages are starting to rise. A modest pullback was seen late on Friday after Kuroda said he had not made any changes to his outlook for inflation.

SWISS FRANC

The Swiss Franc was the strongest of the G10 currencies last week. Safe-haven flows offered support throughout the week as concerns of protectionist policies resurfaced.

SNB President Jordan also prompted a boost after saying they have the willingness to intervene in the currency market if necessary.

AUSTRALIAN DOLLAR

The Australian Dollar saw a modest strengthening last week. Domestic impulses were limited with only the leading index on the data front rising 0.3%.

Weak iron ore prices did provide a weight but were balanced by a weekly gain of over four-percent for US crude futures.

CANADIAN DOLLAR

The Canadian Dollar was mixed last week. NAFTA negotiations were the main focus although notable developments were few and far between.

President Trump warned that he could pull the US from the deal while Canadian negotiators said talks remain constructive.

Data wise, CPI figures were a touch softer on Friday while retail sales were mixed – neither of which prompted much reaction.

NEW ZEALAND DOLLAR

CPI figures released on Thursday were the main focus for investors and the New Zealand Dollar dropped after they came up short of expectations.

For the week, the New Zealand Dollar gained 1.1% versus the US Dollar but lost 0.1% versus the Euro and 0.4% versus the Australian Dollar.

SWEDISH KRONA

The Swedish Krona strengthened for the most part last week. Hawkish central bank commentary provided a boost after Riksbank’s Floden said everything points towards them being able to raise rates before the ECB.

Data impulses were mixed – unemployment was lower than expected while consumer confidence dropped, and retail sales came up short of forecasts.

NORWEGIAN KRONE

The Norwegian Krone was one of the strongest G10 currencies last week. The Norges Bank left their benchmark deposit rate on hold on Thursday and noted that the outlook and risk scenario for the Norwegian economy had not changed significantly since the previous report.