There were some worrying signs for the health of the UK economy last week, where service PMI fell well short of expectations. The Chief Economist at Markit warned that the UK economy had iced up in March, suffering the weakest increase in business activity since the Brexit vote. However, he did note that disruptions were caused by the inclement weather. Sterling was fairly resilient in response and ended the week with notable demand amid no clear catalyst.
This week we await UK industrial and manufacturing production data on Wednesday which could also have been impacted by the weather.
The US Dollar has begun the trading week in a relatively mundane fashion with the Dollar Index little changed versus Friday’s close. The Greenback finished last week on the defensive after a soft US payrolls print while any attempted upside would also have been limited by concerns of further trade measures in the US-China dispute. The rhetoric over the weekend was fairly constructive with President Trump predicting that they will reach an agreement with China on trade issues.
The key events for this week will be Wednesday’s CPI data and the FOMC minutes due later the same day. Policymakers maintained their view for three rate increases this year in March and investors will want to know the arguments that went on behind this decision.
Italian President Mattarella confirmed on Thursday that consultations have not produced any sign of a coalition deal. He added that they will hold new consultations this week but risks to the Euro grow the longer the uncertainty continues.
From a broader perspective, Euro Zone retail sales were on the soft side while manufacturing and service sector PMI’s were largely unrevised from the flash readings. Ahead, Euro Zone investor confidence is due later today while industrial production figures are out on Thursday. The ECB minutes are also out this week and will be closely watched after the Governing Council dropped their easing bias in the March statement.
The Japanese Yen was at the mercy of global risk sentiment last week as investors reacted to the threat of a global trade war. The Japanese currency fell sharply from Tuesday to Thursday amid signs of thawing tensions between the US and China but finished on the front foot after Trump announced plans for more measures on Friday.
Domestically, macro releases will not have provided much support with soft readings for Tankan manufacturing data, manufacturing PMI and household spending. This week is relatively quiet on the macro front – machinery orders and PPI figures are due Wednesday.
Swiss National Bank board member Maechler said on Friday that although the Swiss Franc had devalued, the situation remains fragile. His colleague at the SNB Moser added that they observe the current market closely and are ready to influence if needed. Moves in the Franc were relatively muted last week even after the stronger-than-expected CPI data.
The Reserve Bank of Australia left their benchmark unchanged at 1.50% last week in an announcement that largely flew under the radar.
Stronger-than-expected retail sales data provided a boost on Wednesday although any upside will have been limited by the ongoing trade dispute between the US and China. Looking ahead, RBA Governor Lowe speaks on Wednesday.
Recent NAFTA related rhetoric from all sides has been broadly positive and this underpinned the Canadian Dollar in recent trading sessions. The Dollar saw some upside in the wake of Friday’s jobs report after a larger-than-expected increase in employment although this proved short lived.
NAFTA developments remain the focus for investors while housing starts and building permits are due this week.
NEW ZEALAND DOLLAR
The New Zealand Dollar saw a modest strengthening last week although domestic impulses were limited. Retail sales figures and Business NZ PMI follow later this week.
The Swedish Krona was one of the weaker G10 currencies last week, adding to recent declines. Any upside in the Swedish currency has been limited by the recent dovish rhetoric from the Riksbank although officials kept quiet last week. Macro releases were largely ignored, including a soft Manufacturing PMI print. CPI data due on Thursday will likely garner more attention with the headline rate seen rising to +2.0% YoY from (f/c. +1.6%)
The Norwegian Krone saw a modest strengthening last week. A Reuters poll released on Friday also said the Norwegian Krone was likely to appreciate over the next year as monetary policy is expected to tighten. Norges Bank Governor Olsen did little to dispel such expectations on Friday where he repeated the view that rates will rise after the Summer.
Manufacturing production released this morning was stronger than expected. Focus this week now turns to tomorrows CPI data with the headline rate expected to quicken to +2.5% YoY in March from +2.2%.
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