Sterling was a touch softer on balance last week. Losses were seen on Friday after a notably soft reading for UK construction PMI which fell to a 4-month low at 50.2. The currency also dropped after EU officials said the EU Commission have rejected the City of London’s proposal to strike a post-Brexit free trade deal for financial services.
Providing support meanwhile were comments from Bank of England Governor Carney who said the important thing with monetary policy is that slack in the economy is removed and focus is on returning inflation to target.
Super Thursday this week where the BoE are expected to keep rates on hold at 0.5%. The bank will also release its quarterly inflation report along with the minuets from the monetary policy committee’s last meeting. Industrial and manufacturing PMI data on Friday bring the week to a close.
For the week, Sterling lost 0.4% versus the US Dollar and 0.5% versus the Euro but gained 1.1% versus the Japanese Yen.
The Euro was one of the strongest G10 currencies last week. Hawkish chatter from the European Central Bank seemed to be a theme for the week, as comments from council member Klaas Knot over the weekend were followed by a sources story that suggested some policymakers want to give a clearer signal on how long rates will remain unchanged.
The single currency dropped on Tuesday after German CPI data came in below forecasts.
Data is light from the euro zone this week, however ECB President Mario Draghi will be speaking this afternoon.
The US Dollar gained against almost all its G10 rivals last week. The Federal Open Market Committee (FOMC) policy decision on Wednesday provided a modest lift after the statement took a slightly more hawkish tone on inflation. Further gains were seen on Friday after the US jobs report where non-farm payrolls beat forecasts at 200,000 (forecast at 180,000) and average hourly earnings jumped 2.9% year-on-year (forecast at 2.6%) which marks the fastest pace since mid-2009.
Further upside was seen in the wake of stronger-than-expected Michigan Sentiment, Factory Orders and comments from White House economic adviser Gary Cohn who said a strong US Dollar is always in the interests of the US.
Gains were cut in the latter stages of Friday’s session however after Congress released the Republican memo accusing the FBI of abusing its power in its investigations into Donald Trump’s presidential campaign.
The Bank of Japan’s summary of opinions was released on Wednesday and said they must continue with powerful easing policy as inflation remains weak. Speculation of an early exit from their massive stimulus program was also shot down by the bank as they increased the number of Japanese government bonds (JGB) with three to five years to maturity it will buy in regular market operations.
The Swiss Franc saw a modest strengthening on balance last week. Safe-haven flows were evident mid-week amid the US equity market rout and rise in global government bond yields.
Domestically, data impulses were mixed as soft retail sales were balanced by a stronger PMI print on Thursday.
The Australian Dollar was among the weakest G10 currencies last week. Weaker-than-expected CPI data released on Thursday appeared to be the main catalyst while a nosedive in building approvals and soft Chinese manufacturing PMI also provided a weight.
NAFTA impulses were largely negative with little progress to note – Canadian Foreign Minister Freeland says there are still significant gaps on a number of issues, while US Commerce Secretary Ross said NAFTA is far from being completed, and little progress has been made on the hard issues. On Friday, Canadian PM Trudeau said Canada is willing to walk away from NAFTA.
Data wise, manufacturing PMI rose to 55.9 from 54.7 while GDP was a touch stronger than expected in November at 3.5% YoY against a forecast of 3.4%.