UK’s Brexit minister David Davis resigned over the weekend and Davis’ move spurred other hard-liners within the UK’s Brexit branch to resign as well, although it has not weighed much with GBP/USD advancing above 1.33 this morning. Theresa May’s latest proposal for a soft Brexit is expected to face heavy challenges from Tory conservatives within parliament.
Sterling was underpinned last week by a triple PMI beat with manufacturing, services and construction all higher than expected for June.
Industrial and manufacturing production figures are out tomorrow while Bank of England’s Cunliffe speaks on Friday.
The Dollar Index hit a three-week low on Friday following the US jobs report – although the headline payroll figure was stronger than expected (213k vs 195K) the unemployment rate also moved higher and average hourly earnings were slightly softer.
Thursday’s FOMC minutes were largely ignored as concerns highlighted around trade were not expected to derail their hiking plans.
On the data front, we await JOLTS tomorrow, PPI on Wednesday, CPI on Thursday and import prices on Friday. We also expect possible comments from Fed Presidents’s Kashkari, Williams, Harker and Bostic.
The Euro rose to a three-week high versus the US Dollar on Friday as the single currency wrapped up a broadly positive week. Gains followed an ECB sources story on Wednesday that suggested that some policymakers were uneasy that investors were not betting on a rate increase until December 2019.
Strong German data and upbeat comments from ECB Chief Economist Praet may also have played their part.
Sentix investor confidence is out shortly while ZEW data and industrial production follows on Thursday.
Last week was relatively quiet for the Japanese Yen after an earlier move above 111 for USD/JPY faded towards the weekend.
On the calendar this week we await machine tool orders tomorrow and industrial production on Friday.
EUR/CHF pushed up to a three-week high on Friday, just shy of 1.1650 while the pair has begun this week on a slightly softer note – Swiss seasonally adjusted unemployment ticked up.
CPI data released on Thursday was slightly softer than expected but provided only a brief spell of weakness in the Franc.
The Reserve Bank of Australia left the Cash Rate on hold last Tuesday at 1.50% while policymakers offered no real surprise in the policy statement. Reaction in the Aussie Dollar was limited although AUD/USD has opened this week on the front foot and is flirting with a two-week high.
Looking ahead, we await NAB data tomorrow, home loans on Wednesday and inflation expectations on Thursday.
The Bank of Canada are widely expected to raise rates on Wednesday despite the ongoing trade tensions. USD/CAD hit a three-week low versus the US Dollar on Friday after a choppy reaction to the jobs report.
Data due this week includes housing starts and building permits tomorrow and new house price data on Thursday.
NEW ZEALAND DOLLAR
The New Zealand Dollar finished last week as one of the strongest G10 currencies, reaching a one-week high versus the US Dollar. Domestic impulses were limited however with analysts highlighting short covering and technical retracements as the main driver.
The Swedish Krona strengthened last week, rising to a three-week high versus the US Dollar on Friday and a near three-week high versus the Euro on Thursday. Gains followed Tuesday’s Riksbank announcement where although rates were left on hold, Deputy Governor Ohlsson advocated hiking by 25 basis points to -0.25%. Riksbank Governor Skingsley added on Thursday that a rate increase in October or December is still possible.
Looking ahead, unemployment figures are out Wednesday followed by CPI on Thursday.
Fresh domestic impulses were limited but recent hawkish central bank rhetoric continues to underpin the Krone. We did see a modicum of weakness on Friday after manufacturing production missed expectations.
Tomorrow’s CPI data will be the focus for investors this week with the headline rate seen unchanged at +2.3% YoY.
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