Super Thursday at the Bank of England

STERLING

Brexit related developments haven taken somewhat of a backseat for the pound of late although GBP/USD dipped below 1.29 last week to a two-month low of 1.2865. The pair has inched higher overnight despite warnings from rating agencies on Friday that the UK rating is still at risk from a no-deal Brexit.

Looking ahead, all eyes are on the Bank of England who are widely expected to leave the Bank Rate on hold on ‘Super Thursday’ – analysts have highlighted the risk of a hawkish dissent.

US DOLLAR

The Dollar Index was hovering around the 98.0 level earlier today having eased back from Friday’s two-year high after a mixed GDP report. Although the headline Q1 print was much stronger than expected, the internal metrics painted a much weaker picture.

Investors are likely to remain cautious this week ahead of the FOMC policy meeting on Wednesday and the jobs report on Friday.

EURO

The theme of weaker-than-expected Euro Zone data continued last week as Euro Zone consumer confidence and German IFO both surprised to the downside. The single currency declined thereafter with EUR/USD reaching a low of $1.1106 on Friday – its lowest level since May 2017. Investors will have breathed a sigh of relief on Friday however as S&P opted not to downgrade the Italian sovereign.

Euro Zone GDP and German CPI are due tomorrow, Euro Zone manufacturing PMI on Thursday and CPI on Friday.

JAPANESE YEN

The Bank of Japan modified their forward guidance last week as they pledged to keep rates low until the Spring of 2020. Reaction in the Yen was muted however while fears of a potential flash-crash during the Japanese market holiday have so far proved unfounded. USD/JPY edged higher overnight having touched a two-week low on Thursday at 111.36.

Japanese markets closed until next Tuesday.

SWISS FRANC

EUR/CHF topped out at a fresh six-month high last Tuesday at 1.1478 but later surrendered the 1.14 handle. SNB President Jordan spoke on Friday although provided no real surprises as he argued that they must maintain negative rates and stand ready to intervene on currency markets to rein in the strong franc.

Retail sales are due on Thursday followed by CPI data on Friday.

AUSTRALIAN DOLLAR

The Australian Dollar briefly surrendered 0.70 on Thursday, falling to a four-month low at 0.6988. The big drop came on Wednesday however after Australian CPI fell way short of expectations, prompting a number of economists to revise their RBA bets with some calling for a cut at next week’s meeting.

This week, we await home loans tomorrow, manufacturing PMI on Wednesday, new home sales on Thursday and service PMI on Friday.

NEW ZEALAND DOLLAR

The New Zealand Dollar saw a rebound into the weekend, having fallen to a fresh four-month low on Thursday at 0.6580. Catalysts included upbeat remarks from RBNZ Governor Orr plus stronger-than-expected trade data and ANZ consumer confidence.

Employment indicators are out on Wednesday followed by building consents on Thursday.

CANADIAN DOLLAR

The Canadian Dollar fell sharply on Wednesday after the Bank of Canada abandoned its rate-hike bias amid a slowdown in economic activity. USD/CAD topped out at 1.3520, its highest level since early January.

February GDP figures are out tomorrow followed by PMI on Thursday. We also expect comments from the Bank of Canada Governor Poloz and Deputy Governor Wilkins tomorrow.

SWEDISH KRONA

The Swedish Krona fell sharply on Thursday after the Riksbank pushed back rate expectations to early next year. EUR/SEK spiked to its highest level since August 2018 at 10.6655.

Manufacturing PMI is due for release on Thursday.

NORWEGIAN KRONE

EUR/NOK flirted with the 9.7 level towards the end of the last week as the Krone softened on the sharp pullback in crude prices. Domestic impulses were limited beyond industrial confidence data which softened to 7.0 from 8.7 in Q1.

Looking ahead, retail sales are out tomorrow followed by PMI on Thursday and unemployment data on Friday.