Sterling has begun the week as the G10 underperformer after Brexit related uncertainty intensified over the week – EU Brexit Minister Michel Barnier has been highly critical of Prime Minister Theresa May’s Chequers proposal. However, the PM insists she will not allow compromises to her Brexit strategy, vowing the nation’s interests must be adhered to.
According to multiple media reports over the weekend, Bank of England governor Mark Carney had indicated he was willing to remain in charge of the central bank beyond 2019 to ensure consistency throughout the UK’s transition from the European Union. However, Theresa Mays spokesperson has quashed these reports this morning and confirmed that governor Carney will leave in June next year.
GBP/USD has dipped below $1.29 this morning with a recent miss for UK manufacturing PMI coming in at 52.8 against a forecast of 53.8.
Construction and service sector PMI follow tomorrow and Wednesday while house prices and inflation expectations follow on Friday.
It has been a relatively slow start to the week for the US Dollar with the Labour Day holiday keeping volumes on the light side. The Dollar Index has inched lower this morning, pulling back from Friday’s one-week high at 95.23. Month end impulses were said to be negative but failed to prompt much downside in the Greenback with the rout in emerging market currencies providing some support.
Looking ahead, Markit manufacturing PMI and ISM data are both due tomorrow while service sector readings are out on Thursday alongside unit labor costs and factory orders. FOMC speakers are also in abundance with Chicago Fed President Evans due later today plus Williams, Kashkari, Bostic, Rosengren, Mester and Kaplan later in the week.
The Euro sunk on Friday after Euro Zone headline and core CPI fell short of expectations – EUR/USD dropped to a one week low of 1.1585. The pair has found some minor support this morning, however despite a rating downgrade for Italy over the weekend to BBB, from stable to negative. Vulnerabilities from higher debt projections and political uncertainty were the reasons cited.
Looking ahead, Euro Zone PPI data is due tomorrow, retail sales and service PMI on Wednesday and GDP on Friday.
USD/JPY is nursing a minor loss this morning although has yet to trouble Friday’s one-week low at 110.68. Recent upside in the Japanese currency has been spurred by safe-haven demand as global trade tensions intensified with little reaction shown to Friday’s data – weak industrial production and stronger Tokyo CPI.
Bank of Japan board member Kataoka speaks on Thursday ahead of wage data on Friday.
The Swiss Franc rose to its best level versus the US Dollar since mid-April on Friday with recent upside in the currency spurred by safe-haven demand as global trade tensions intensified. USD/CHF is flat this morning at around 0.97 with minimal reaction shown to this morning’s data – soft retail sales and a PMI beat.
Tomorrow brings CPI data and GDP on Thursday.
The Australian Dollar sunk to its lowest level versus the US Dollar since the end of 2016 this morning at 0.7166, weighed by weaker-than-expected Australian retail sales data released overnight. This added to the downside seen towards the end of last week after Westpac became the first major bank to hike mortgage rates. However, the pair has since bounced back above 0.72 with investors now looking ahead to tomorrow’s RBA policy meeting where the Cash Rate is widely expected to remain on hold at 1.50%.
The Canadian Dollar has been fairly resilient this morning despite a lack of a NAFTA deal over the weekend – Trump even threatened to remove Canada from the new NAFTA deal.
USD/CAD topped out last week at 1.3091 on Thursday after Canadian GDP surprised to the downside and is still holding firmly above the 1.30 level.
Wednesday’s Bank of Canada rate decision will be the main focus for investors this week while unemployment figures follow on Friday.
EUR/SEK hit its best level since the Summer of 2009 last Tuesday after the Swedish Krona tumbled on weaker-than-expected retail sales data. The pair has since eased back to trade around the 10.6 level with Thursday’s confidence indicators providing a small lift to the Krona with investors now looking ahead to Thursday’s Riksbank meeting where the benchmark rate is expected to remain on hold at -0.50%.
The Norwegian Krone is continuing the downward trend from Thursday’s soft retail sales data – reaching a daily low of 1.0894.
Manufacturing PMI rose this morning although was largely ignored with investors counting down to the Norges Bank meeting and likely interest rate hike this month.
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