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Sterling struggles as BoE rate decision approaches

Currency Global - Market News

STERLING

Sterling was rocked last week by a string of weaker-than-expected macro data releases and negative Brexit headlines. It has seen a better start to the week however with M&A news leading GBP/USD higher yesterday where UK markets were closed for the bank holiday.

Investors are now looking ahead to Thursday’s Bank of England meeting where expectations for an interest rate increase have fallen dramatically in recent weeks, now sub-20%. Sterling has lost over 5% against the Dollar from its highs in April after Governor Carney said that the underperforming data has not gone unnoticed.

US DOLLAR

Last week’s FOMC policy meeting prompted some volatility in the US Dollar but the prevailing move was to the upside as policymakers altered their language on inflation. Friday’s payrolls report caused a brief wobble, but the Greenback is on the front foot again today, gaining ground versus most of its G10 rivals. Comments from Fed Chair Powell overnight were largely ignored as he argued the benefits of good policy communication.

Thursday’s CPI data will be the main data focus this week.

EURO

The Euro begun the trading week as one of the weakest G10 currencies as economic data came up short of expectations. We saw weaker readings yesterday for German factory orders, Euro Zone retail PMI and Sentix investor confidence. Comments from ECB Chief Economist Praet did not prompt much reaction with investors possibly keeping a close eye on Italian political developments as fresh elections loom.

Data releases from the bloc are limited for the rest of the week while ECB President Mario Draghi is due to speak on Friday.

JAPANESE YEN

There has not been much for the Japanese Yen to work with so far this week with little reaction shows to household spending data released overnight. We have seen some mild safe haven demand ahead of Trumps announcement on the Iranian nuclear deal later today.

The Bank of Japan’s ‘Summary of Opinions’ is out on Thursday although should not contain any real surprises for investors.

SWISS FRANC

We saw some weakness in the Swiss Franc to start the week on the back of yesterday’s soft CPI data. A broadly positive start in equity space will also have weighed on the perceived safe haven currency although some support has been seen this morning ahead of Trumps announcement on the Iranian nuclear deal.

Unemployment figures follow tomorrow and that will be it for the week on the data front.

AUSTRALIAN DOLLAR

Last week’s RBA decision proved a non-event with policymaker’s likely content with the wait-and-see approach the markets have interpreted. We have seen some weakness today amid the pullback in energy space and soft Australian reta sales data released overnight.

CANADIAN DOLLAR

The Canadian Dollar has slipped to the bottom of the G10 pile this morning, weighed by the pullback in oil prices and ongoing NAFTA uncertainty.

Focus will be on Trumps Iran decision later today while Friday’s jobs data is the next key domestic event.

NEW ZEALAND DOLLAR

Labour market data released last week failed to offer much firm direction to the New Zealand Dollar and investors will be hoping for more to work with in Wednesday’s RBNZ decision. The OCR is seen on hold, but this is the first meeting for new Governor Orr and he may well want to make his mark on the statement.

New Zealand inflation expectations were on the soft side overnight and provided a modest weight.

SWEDISH KRONA

The Swedish Krona has outperformed its G10 counterparts this morning after the Rilsbank minutes reaffirmed year end rate hike expectations.

Manufacturing PMI data did disappoint yesterday while industrial orders are due on Friday.

NORWEGIAN KRONE

The Norwegian Krone strengthened last week, boosted by the Norges Bank who appeared to strike a more hawkish tone than many had expected. Wednesday’s CPI data could offer some further direction and will likely be the main focus for investors this week.

 

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