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Market News – 30 October 2017

STERLING

A mixed week for the pound last week, having its best day on Wednesday after third-quarter GDP was revised higher to 0.4% after initial readings of 0.3 percent.

Other macro releases were less supportive however, with CBI retail sales falling at their fastest rate since the recession.

Dovish remarks from Bank of England Deputy Governor Cunliffe also provided a weight after he said he does not want to anticipate the November rate decision but did note that the economy has clearly slowed this year.

All eyes will be focused on the Bank of England interest rate decision this Thursday. A potential hike for the first time in 10 years could lend support to a positive move for Sterling. Markets have priced in an 84 percent probability that the Monetary Policy Committee (MPC) will raise rates from their current low of 0.25 percent.

EURO

The single currency fell sharply on Thursday after the ECB announced a nine-month extension of their asset purchase program, albeit at a reduced pace, dropping from €60 bln to €30 bln per month.

The Governing Council also opted to maintain their existing guidance that leaves the option of extending the program on the table – some economists had suggested the ECB could announce a definitive end date.

Further losses were seen on Friday after the Catalan parliament voted in favour of declaring independence from Spain.

US DOLLAR

The US Dollar gained against all the G10 currencies last week with the Dollar Index adding 1.3 percent.

The majority of the gains came towards the end of the week after the US House of Representatives passed the budget resolution that is expected to help fast track tax reform.

Data will also have provided some support after third-quarter GDP exceeded expectations at 3 percent. The Dollar saw a slight wobble on Friday however, after reports suggested that Jerome Powell was the frontrunner for the Federal Reserve Chair role, although separate reports said no decision has been made yet.

JAPANESE YEN

Last week was mildly positive for the Japanese Yen on balance although it did log a minor loss versus the US Dollar. Fresh impulses were limited although safe-haven flows were evident as the situation in Catalonia escalated through the week, culminating in Friday’s vote for independence.

Domestically, CPI figures released on Friday were in line with expectations and generated minimal reaction.

SWISS FRANC

A quiet week for the Swiss Franc with few domestic impulses for traders to work with. The UBS consumption indicator and ZEW expectations index both posted increases which provided a modicum of support.

AUSTRALIAN DOLLAR

The Australian Dollar was one of the weakest G10 currencies last week. Heavy losses were seen on Wednesday after Australian CPI was reported to have slowed in Q3 to 1.8 percent year-on-year.

The move lower continued Friday after the Australian High Court ruled Deputy PM Joyce is ineligible for parliament along with Senators Roberts, Waters, Ludam and Nash

CANADIAN DOLLAR

The Canadian Dollar weakened against most of the G10 currencies last week. The bulk of the decline came on Wednesday after the Bank of Canada said they will be cautious in making future adjustments to the policy rate.

Comments from Governor Poloz on Thursday flew under the radar somewhat but still likely provided a weight as he argued a lot of things will have to come together before the next rate hike.

NEW ZEALAND DOLLAR

It was a mixed week of the New Zealand Dollar. It fell sharply on Tuesday after New Zealand PM-Designate Jacinda Ardern gave her take on the Reserve Bank Act, citing that she will focus on employment and price stability in its Reserve Bank Act reform and review.

Softer trade figures on Thursday also provided a weight but we saw a bounce back on Friday as oil prices capped on an impressive gain of almost four-percent for the week.

SWEDISH KRONA

The Swedish Krona weakened last week following Thursday’s Riksbank announcement where officials left the door open to additional asset purchases. The board also extended its mandate to allow “a quick intervention in the foreign exchange market”.

NORWEGIAN KRONE

The Norwegian Krone weakened last week. The bulk of declines came on Thursday after the Norges Bank voted unanimously to keep rates on hold and noted little change in their assessment of growth in the Norwegian economy.