Sterling slides on Rudd's resignation

Currency market reports


Sterling fell sharply on Friday after data showed the UK economy almost came to a standstill in the first quarter, posting a GDP print of just +0.1% quarter-on-quarter versus forecasts for a gain of +0.3%. The data has dampened expectations for an interest rate increase at the Bank of England next month to less than 20%.

Home Secretary Amber Rudd resigned yesterday after ‘’inadvertently misleading’’ MP’s over targets for the deportation of illegal immigrants. To add to Theresa Mays woes, rumours over the weekend suggested that the UK’s Brexit secretary David Davis is close to resigning after becoming ‘’extremely frustrated.’’

This week we look ahead to manufacturing and service sector PMI which will be closely watched for further evidence of an economic slowdown.


The Dollar Index rose to just shy of the 92 level on Friday – its best level since mid-January. Gains were tempered somewhat soon after however as US yields retreated below the three-percent level and US GDP offered some mixed signals for the economy.

Attention now turns to Wednesday’s FOMC policy decision where most economists expect rates to remain on hold ahead of the April payrolls report on Friday.


The European Central Bank stood pat on policy on Thursday as economists had predicted. The Euro was choppy in the press conference that followed as Mario Draghi acknowledged the moderation in economic data but also signalled confidence in the longer terms outlook.

Losses followed later in the session in what could have been a delayed reaction. The single currency found some support on Friday after Euro Zone confidence indicators were mostly stronger-than-expected.
This week we await Euro Zone GDP and unemployment figures on Wednesday ahead of CPI on Thursday and PMI plus retail sales on Friday.


The Bank of Japan made no changes to policy on Friday although did drop a reference to reaching their inflation goal around full-year 2019. Reaction was fairly muted however, with the Yen focused on broader risk sentiment for most of last week.

Looking ahead, Japanese markets are closed on Thursday and Friday while data releases are limited – manufacturing PMI is out tomorrow ahead of household confidence on Wednesday.


SNB President Thomas Jordan said on Friday that they would move forward with expansionary policy, adding that the Swiss Franc remains highly valued.

Moves were relatively muted in the currency last week meanwhile with EUR/CHF unable to make another move above the 1.20 level that investors are watching closely.

Swiss markets are closed tomorrow for Labour Day while retail sales and PMI figures are out on Wednesday ahead of possible comments from Jordan again on Thursday.


Australian CPI data came up short of expectations last week which supported the recent ‘wait-and-see’ stance seemingly adopted by the Reserve Bank of Australia.

Officials meet tomorrow where rates are widely expected to remain on hold although some economists have suggested they could reign in the growth outlook.


The Canadian Dollar was one of the stronger G10 currencies last week, supported by remarks from Bank of Canada Governor Poloz who said people need to be ready for higher rates.
NAFTA negotiations also appear to be moving in the right direction, albeit slowly, with progress said to have been made on autos.

Looking ahead, GDP figures are out tomorrow alongside manufacturing PMI.


The Swedish Krona finished last week as the weakest of the G10 currencies having fell sharply on Wednesday in response to the Riksbank announcement. Rates were maintained at -0.50% but they went on to note that they “will begin to be raised towards the end of the year, which is somewhat later than previously forecast”.

This week we await manufacturing and service PMI plus industrial production figures.


The Norwegian Krone fell last week in response to reports that the parliament are seeking to reverse the decision to lower the inflation target. The finance ministry declined to comment but the Riksbank meet on Thursday and could provide some clarification for investors.

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