Sterling found some support towards the end of last week amid reports that the UK could remain in the customs union until 2020. Earlier in the week Theresa May is reported to have said that Brexit negotiations are at an impasse because neither of her current options for a customs deal with the EU will work.
Labour market data was mixed and offered little direction for the pound which is trading near the year to date lows to start the week.
Looking ahead, a busy data week with inflation figures on Wednesday, retail sales on Thursday and GDP on Friday.
The US Dollar has begun the week at new year to date highs, supported by the seemingly positive conclusion to the first round of US-China trade talks.
Rising US yields were the main driver last week meanwhile with the 10-year moving above three percent with more conviction than its prior attempt.
Looking ahead, FOMC speakers are in abundance this week with three due later today ahead of the FOMC minutes on Wednesday. Data wise, PMI prints due Wednesday and durable goods on Friday will be the focus.
The Euro was among the weakest G10 currencies last week as investors contemplated the impact of a likely populist government in Italy.
Italian assets and the Euro were spooked on Wednesday amid reports that they could ask the ECB to forgive €250 Bln of debt and seek a rule change to allow members to leave.
From a broader view, Euro Zone CPI data was unrevised from the flash reading and was largely ignored while ECB Vice President Constancio assured that the slight slowdown in the Euro Zone growth was expected and within staff projections.
Looking ahead, Markit PMI releases are out tomorrow although Thursday’s ECB minutes may garner more attention.
The Japanese Yen limped into the weekend after falling last week on soft GDP and inflation data which will arm the doves at the Bank of Japan heading into the next policy meeting. It had also started the week with a soft tone as US-China trade talks concluded with some progress on both sides.
Ahead, we await manufacturing PMI on Wednesday, leading index on Thursday and Tokyo CPI on Friday.
Last week was a quiet one for the Swiss Franc with minimal domestic impulses for investors to work with. A weaker Euro helped EUR/CHF to break below 1.18 for the first time in a month.
Industrial orders on Friday are the only release of note.
The Australian Dollar stumbled last week with AUD/USD flirting with a near one-year low.
Soft wage data on Wednesday was followed by a mixed jobs report on Thursday has raised some question marks over the health of the labour market although investors welcomed the uptick in the participation rate.
Macro releases this week are all due on Wednesday – leading index, construction work done and consumer sentiment. We also expect comments from RBA Governor Lowe.
A combination of negative NAFTA headlines and soft domestic macro data pulled the Canadian Dollar lower last week. US Trade Representative Lighthizer said on Thursday were nowhere near a NAFTA deal as the soft deadline passed. This was followed by soft CPI data on Friday which knocked Bank of Canada rate hike probabilities for the coming months.
NAFTA headlines remain in focus this week amid a quieter data slate.
NEW ZEALAND DOLLAR
The New Zealand Dollar finished last week on the front foot, notably at the expense of its Antipodean partner with AUD/NZD easing back from multi-week highs. It saw some upside after the annual budget releases on Thursday.
The Dollar has started the week with a slightly softer tone meanwhile after retail sales fell short of expectations. Trade data follows on Wednesday.
Hawkish Riskbank commentary supported the Swedish Krona last week. Deputy Governor Skingsley suggested that they could hike rates in October while Jochnick argued that the recent strengthen in the crown is a good thing.
This week we await unemployment data tomorrow and PPI on Thursday.
The recent rally in oil prices has kept the Norwegian Krone supported in recent trading sessions, helping EUR/NOK edge back down towards the 9.5 level last week. Central bank impulses also remain supportive with Norges Bank Governor Olsen commenting last Monday that it will soon be the right time to hike rates.
Consumer confidence data is due Wednesday and unemployment figures on Friday.
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