May says no-deal Brexit “not the end of the world”
STERLING
GBP/USD has edged above 1.29 today although any upside in Sterling is likely to remain limited by a lack of progress in Brexit negotiations. The UK government unveiled the impact of a no-deal Brexit last week but officials still maintain they expect to reach an agreement with the EU.
Looking ahead, UK house price data is released tomorrow while GFK consumer confidence follows on Friday.
US DOLLAR
The Dollar Index dropped to its lowest level in just over four-weeks this morning at 94.67. The sell-off began on Friday after remarks from Federal Reserve Chairman Jerome Powell at Jackson Hole and continued this week after the US and Mexico agreed to a bilateral trade agreement. The agreement is an update to NAFTA which Canada are under threat of being left out by President Trump, although many lawmakers believe it may not be legally possible to move forward without a trilateral agreement including Canada.
Looking ahead, the advance goods trade balance and wholesale inventories are out later today, GDP and pending home sales tomorrow, PCE on Thursday and Chicago PMI/Michigan Sentiment on Friday.
EURO
The Euro has risen to the top of the G10 pile in recent trading sessions with the single currency advancing to 1.17 versus the Dollar this morning. Yesterday’s stronger-than-expected German IFO data provided an immediate boost with investors now looking ahead to French GDP due tomorrow, German CPI and Euro Zone confidence indicators on Thursday and Euro Zone CPI on Friday.
JAPANESE YEN
USD/JPY is just above holding above the 111 handle this morning having risen sharply towards the end of last week on improved risk sentiment. A soft print for Japanese CPI may also have provided a weight.
Retail sales figures are on Thursday while Tokyo CPI, unemployment and industrial production data follow on Friday.
SWISS FRANC
There have been contrasting fortunes for the Swiss Franc pairs this morning with EUR/CHF up to its best level since August 10th and USD/CHF at its lowest since April 24th.
Swiss employment ticked above five million this morning (5.048 Mln v 4.985 Mln forecast) although was largely ignored by the market. We also heard from the SNB’s Moser last week who warned it could take years for them to reduce the balance sheet, if ever.
Looking ahead, ZEW data is out tomorrow while the KOF leading indicator follows on Thursday.
AUSTRALIAN DOLLAR
The Australian Dollar has been one of the more volatile G10 currencies in recent trading sessions as investors reacted to domestic political developments. AUD/USD dropped to a weekly low of 0.7237 on Friday amid political infighting but rebounded after former Treasurer Morrison emerged from the leadership vote as the new PM, replacing Turnbull.
New home sales are out tomorrow, building approvals on Thursday while AIG manufacturing and new home sales follow on Friday.
CANADIAN DOLLAR
The Canadian Dollar has seen some upside on either side of the weekend amid signs of improving trade prospects with the US and Mexico. USD/CAD has edged lower again this morning to its lowest level since June 14th after the US and Mexico reached a bilateral agreement – attention now turns to a trilateral deal with the inclusion of Canada.
Comments from Bank of Canada Governor Poloz over the weekend have garnered attention as he noted that inflation was very close to target and that the outlook is for higher rates.
GDP figures are out on Thursday while producer prices follow on Friday.
NEW ZEALAND DOLLAR
The New Zealand Dollar finished last week as one of the G10 outperformers, supported by stronger-than-expected retail sales and the positive developments on the global trade front. The Dollar is little changed versus the US Dollar this morning, hovering just below the 0.67 level.
Looking ahead, building consents are out on Wednesday while ANZ confidence indicators follow on Thursday.
SWEDISH KRONA
The Krona has dropped this morning in response to weaker-than-expected Swedish retail sales – headline retail sales dropped -1.2% YoY in July (f/c. +0.5%). EUR/SEK has advanced to its best level since early May while USD/SEK bounced back above 9.1. Any downside may have been limited however by hawkish remarks made by Riksbank Deputy Governor Jochnick on Friday.
NORWEGIAN KRONE
The Norwegian Krone is hovering just below 9.74 versus the Euro – just below last week’s six month peak.
A rate hike by the Norges Bank next month has been well telegraphed by policymakers and is largely priced in with investors now more interested in any new guidance. Thursday’s GDP data provided no real surprises with the mainland rate at +0.5% Quarter-on-quarter as expected.
Consumer confidence dropped this morning to 16.4 from 19.6 and was largely ignored. Retail sales are out on Thursday, followed by unemployment figures on Friday.
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