Sterling struggled to sustain any upward momentum last week despite some positive Brexit headlines. Over the weekend, the Financial Times said Prime Minister Theresa May was planning a customs partnership to unlock the Northern Ireland dilemma although we are yet to see anything concrete.
PMI surveys could steal the spotlight this week, as investors look to gauge whether Brexit related uncertainty is creeping in with less than a year to go. Bank of England Governor Mark Carney follows on Friday.
Month and quarter end demand was evident in the US Dollar last week but with that now in the rear-view mirror, investors will be looking ahead to a busy week of macro releases culminating in Friday’s labour market report – the US economy is expected to have added 195K jobs in March, but more focus will likely be on the wage numbers. Yesterday’s data didn’t create the best start however with ISM manufacturing and construction spending both falling short of expectations.
Signs of deteriorating relations and a looming trade war between the US and China may also limit any upside for the Dollar while FOMC speakers could also play their part with Lael Brainard standing out as one-to-watch later today.
The Euro got off to a strong start last week after some positive developments in Italian politics. Italian President Mattarella is expected to begin talks tomorrow on forming a government and this could prove important for the single currency.
From a broader standpoint, the first look at Euro Zone March CPI is out tomorrow with the core rate expected to edge up to +1.1% YoY from +1.0%.
The Japanese Yen has started the week with a modest bid although has some work to do to reclaim last week’s drop. The perceived safe-haven currency was dented last week by the broadly positive risk sentiment and news of further conciliatory action from North Korea, including a meeting with China.
Domestically, Tankan data released yesterday was disappointing and will likely be the highlight of the week in terms of data.
The Swiss Franc softened last week, suffering a similar fate to the Japanese Yen as safe-haven assets struggled. SNB’s Maechler also gave investors a reminder of their dovish position, noting that they see little inflation momentum next year that would force a change of policy.
Retail sales fell this morning but were stronger than expected but SVME PMI missed forecasts. Still to come this week are CPI figures on Thursday.
The RBA provided no surprises overnight as they left the Cash Rate Target on hold at 1.50% and also repeated the view that a stronger Australian Dollar will result in slower growth. Elsewhere, signs of deteriorating relations between the US and China over trade could weigh on the Australian Dollar.
Data wise, retail sales and building approvals are out tomorrow and trade data on Thursday.
There was not been much progress on NAFTA over the Easter break with Trump warning he will scrap the deal if Mexico does not stop the flow of drugs and people into the US. However, Trump added overnight that he would push for a deal in principle within a fortnight and this has lent some support to the Canadian Dollar.
There were also some warning signs for the Canadian economy last week with GDP data showing it shrank by 0.1% month-on-month in January. Investors will be hoping for some better news out of Friday’s jobs report or the Bank of Canada may have to reassess their outlook.
NEW ZEALAND DOLLAR
A surprise trade surplus for February got the New Zealand Dollar off to a strong start last week although gains dissipated into the Easter weekend. Investors do not have much to work with this week with no notable data releases.
The Krona dropped last week after a Riksbank Deputy Governor stressed that it is possible to do more if needed, adding that the repo-rate could be cut further if necessary. The softer readings for consumer confidence and retail sales will only have strengthened his argument.
Swedish manufacturing PMI came up short of expectations this morning while service PMI and industrial production follow tomorrow.
The Norwegian Krone was among the weakest of the G10 currencies last week although could be forgiven after its run higher since the turn of the year. The soft retail sales figure on Wednesday took the wind out of its sails. Manufacturing PMI fell short of forecasts this morning while the house price index and credit indicator follow later this week.