Sterling was mixed last week. UK inflation data prompted a rally on Tuesday although gains soon dissipated as risk sentiment soured through the second half of the US session. Further gains were seen on Thursday amid reports that the EU had softened their Brexit transition stance. Losses followed on Friday meanwhile after UK retail sales fell short of expectations and EU Brexit Minister Michel Barnier warned the UK are closing the door on models of comparison found with other non-EU countries such as Norway and Switzerland.
For the week, Sterling gained 1.3% versus the US Dollar, was flat versus the Euro and lost 0.9% versus the Japanese Yen.
Data is light this week, with the claimant count rate Wednesday and GDP (QoQ and YoY) Thursday the only releases of note.
Macro data failed to prompt much reaction as Q4 GDP was confirmed at the prior readings although industrial production surprised to the upside.
ECB President Mario Draghi chose not to address monetary policy while Ewald Nowotny said there will be a need for higher interest rates in the foreseeable future, and Jens Weidmann said continuing bond purchases beyond the agreed timeframe is not needed.
Top tier data is light this week. Thursday brings us the ECB Monetary Policy Meeting Accounts and Eurozone Consumer Price Index on Friday bring the week to a close.
The US Dollar fell against all its G10 rivals last week, with the ‘Dollar Index’ losing 1.7% versus the prior Friday’s close. The Greenback derived little support from higher US government bond yields while investors also looked through signs of an acceleration of inflation including higher-than-expected CPI, PPI and import price data.
Instead, the weak US retail sales report coupled with lower US growth forecasts led to stagflation fears while ongoing concerns that the Trump administration will pursue a weaker-Dollar policy also weighed.
A quiet start to the week for data. Manufacturing PMI along with the Federal Open Market Committee minutes are released on Wednesday, with initial and continuing jobless claims on Thursday.
The Japanese Yen was one of the strongest G10 currencies last week. Domestic data releases were on the soft side including Q4 GDP and machinery orders, but investors instead focused on comments from Finance Minister Aso who said the current situation in the Yen does not require intervention. News that Bank of Japan governor Kuroda had been appointed for a second term and the appointment of deflationist academic Wakatabe as Deputy Governor were also largely ignored.
The Swiss Franc saw a modest strengthening last week. Weaker than expected CPI released on Monday set the tone although PPI data released on Tuesday was stronger.
The Australian Dollar was mixed last week although bias appeared to be to the downside. RBA Governor Lowe provided a weight on Friday as he said he would prefer a lower Australian Dollar to a higher one.
Data wise, there was a mixed reaction to Thursday’s employment data as the jump in employment was mainly driven by part timers.
The Canadian Dollar was weaker on balance last week. NAFTA negotiations have made only limited progress according to Canada’s Chief NAFTA Negotiator while Mexican Economy Minister Gaujardo said he cannot rule out that NAFTA will come to an end.
Weakness was also seen after Bank of Canada Deputy Governor Schembri suggested policy might have to be more aggressive to boost confidence and increase demand.
Data wise, we saw weaker-than-expected manufacturing sales and a hefty drop in existing home sales.
NEW ZEALAND DOLLAR
The New Zealand Dollar was one of the stronger G10 currencies last week. Macro releases were limited although gains were seen on Wednesday after inflation expectations ticked up to +2.1% in the first quarter from +2.0%.
The Swedish Krone saw a modest strengthening on balance last week. Wednesday produced a volatile session as the Krone rallied after Deputy Governor Ohlsson dissented on the decision to leave the benchmark rate on hold, before falling after Governor Jansson said they did discuss whether to delay the first rate hike path.
The Norwegian Krone was among the stronger G10 currencies last week.
Consumer confidence rose on Tuesday while the trade surplus also widened on Thursday. Comments from Norges Bank Governor Olsen were also in focus as he said the policy rate may be increased for the first time in seven years, which is a good sign.