Merkel’s election setback


GBP/USD broke below 1.28 on Friday to its lowest level since August 20th as Brexit related uncertainty took its toll. Reports on Friday suggested that inter-cabinet talks had stalled in the UK as lawmakers cannot agree on how to proceed in negotiations.

Chancellor Hammond will deliver the Budget at 3:30pm today for the last time before the UK leaves the EU. He is under pressure to elaborate on Theresa Mays promise earlier this month to end austerity along with stating that a new Budget will be needed should a Brexit deal not be agreed.

Brexit talks may play second string this week however to the Bank of England who meet on Thursday – the MPC are expected to vote 9-0 to leave the Bank Rate on hold at 0.75%. The Inflation Report will also be released with focus on the growth and inflation forecasts for the years ahead.


The Dollar Index hit a ten-week high on Friday at 96.86 – the global reserve currency benefitted from safe-haven flows as the global equity market sell off intensified. The first look at third-quarter GDP also surprised to the upside on Friday although this was countered by weaker readings for the GDP Price Index and Core PCE.

Monthly PCE figures for September are out this afternoon, followed by consumer confidence tomorrow, PMI/ISM on Thursday and the BLS jobs report on Friday.


The Euro saw a choppy reaction to Thursday’s ECB message with the single currency initially rising after Mario Draghi maintained that risks to the outlook were balanced. Losses followed however with EUR/USD extending to a ten-week low on Friday at 1.1336 before bouncing back above 1.14.

We have seen some minor losses for the Euro this morning amid reports that German Chancellor Merkel will not stand for re-election as head of the CDU party in December.

Looking ahead, Euro Zone confidence indicators and GDP data are out tomorrow, CPI and unemployment on Wednesday and manufacturing PMI on Friday.


The Japanese Yen finished Friday as the G10 outperformer, boosted by safe-haven flows. USD/JPY hit a six-week low on Friday at 111.38 before finding support and has reclaimed the 112 handle this morning.

Looking ahead, industrial production figures are out tomorrow, followed by the Bank of Japan and housing data on Wednesday along with manufacturing PMI on Thursday.


Domestic impulses for the Swiss Franc were limited last week while broad risk aversion spurred some safe-haven flows. EUR/CHF touched a three-and-a-half week low on Friday at 1.1343.

Data releases pick up this week with KOF data out tomorrow, ZEW on Wednesday, CPI and PMI and Thursday and retail sales on Friday. SNB Chairman Jordan also speaks on Wednesday.


The Australian Dollar weakened last week with AUD/USD reaching a fresh two-year low on Friday at 0.7021, pressured by tumbling oil prices and a weaker reference rate by the PBOC. The pair bounced into the weekend however and did make a brief appearance above the 0.7100 level this morning.

We await a busy week data wise with building approvals tomorrow, CPI on Wednesday, trade on Thursday and retail sales on Friday.


The Bank of Canada raised the overnight rate twenty-five basis points last Wednesday to 1.75% and also dropped the word ‘gradual’ from their forward guidance. The Dollar rallied in response with USD/CAD falling to a one week low of 1.2969.

GDP figures are out on Wednesday, manufacturing PMI on Thursday and employment data on Friday. Bank of Canada Governor Poloz also speaks tomorrow.


The New Zealand Dollar hit a two-week low versus the Greenback on Friday at 0.6465 but rebounded before the week was out and has continued higher this morning to a high of 0.6554. Weak oil prices had provided a weight last week, as did a weaker-than-expected trade balance on Thursday.

Looking ahead, building consents are out tomorrow followed by ANZ confidence data on Wednesday.


The Swedish Krona weakened last week with the bulk of declines coming on Wednesday after the Riksbank rate announcement – the repo rate was left on hold and guidance for an increase in February or December was maintained despite the recent upside surprise in inflation data. EUR/SEK topped out at a two week high on Friday at 10.4425.

Looking ahead, a quiet week macro wise with only manufacturing PMI data due on Thursday.


The Norges Bank stood firm on Thursday leaving the key policy rate on hold at 0.75% and maintaining their guidance that rates would likely rise in the first-quarter. The Krone saw a modest strengthening in response although this proved short lived with EUR/NOK reaching a two-week high on Friday at 9.5537.

Retail sales are out tomorrow followed by manufacturing PMI on Thursday and unemployment on Friday.

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