Trump continues criticism of Fed monetary policy

US DOLLAR

After a soft start to last week, the US Dollar finished strongly with the Dollar Index hitting a one-week high on Friday at 96.55. Thursday’s stronger than expected GDP data was the main catalyst after the Greenback had shown little reaction to relatively mundane comments from Fed Chair Jerome Powell.

Comments from US President Trump bemoaning the strength of the Dollar over the weekend prompted some minor weakness at today’s open, but the Dollar Index is now slightly higher for the day.

Looking ahead, Friday’s jobs report will likely be the main attraction with a preview on Wednesday via ADP. We also await ISM non-manufacturing tomorrow alongside new home sales, trade data on Wednesday and unit labour costs on Thursday.

STERLING

The Pound begun the trading week on the front foot with GBP/USD gapping higher overnight after conciliatory remarks from both sides of the Brexit debate boosted hopes of a deal, or perhaps more importantly, reduced the threat of no-deal, however those gains have now faded, with current levels back to today’s open.

Looking ahead, Brexit related developments will likely be the main driver of the pound although service PMI figures could prompt some reaction tomorrow.

EURO

EUR/USD topped out at a three-week high on Thursday at 1.1422 as the single currency benefited from stronger-than-expected Euro Zone confidence indicators and German state CPI.

Service PMI and retail sales are due tomorrow while Q4 GDP figures are out on Thursday although will likely be overshadowed by the European Central Bank. There was talk of a think tank report last week suggesting Mario Draghi will hint at another LTRO.

JAPANESE YEN

The Japanese Yen hit its lowest level versus the Greenback in ten-weeks on Friday; USD/JPY topped out at 112.08. The pair benefited from a broad rise in US government bond yields plus dovish Bank of Japan rhetoric after Governor Kuroda said the chances of reaching the inflation target in 2020 are low.

Thursday’s Q4 GDP figures are the first notable release of the week. We also expect comments from BoJ board member Harada on Wednesday.

SWISS FRANC

Moves in the Swiss Franc have been relatively muted of late with EUR/CHF contained in the 1.13-1.14 range since February 14th. The perceived safe-haven currency did see some modest demand on rising India-Pakistan tensions early in the week. Domestic impulses were less supportive meanwhile, including weaker-than-expected GDP and retail sales.

CPI figures are out tomorrow followed by unemployment data on Thursday.

AUSTRALIAN DOLLAR

The Australian Dollar opened on the front foot overnight on reports a US-China trade deal was in the final stages although gains proved short lived with AUD/USD back below 0.71. The Aussie Dollar finished last week on the back foot after a string of weaker-than-expected domestic and Chinese data releases.

The RBA policy decision due tomorrow will likely be the main focus although Q4 GDP figures due on Wednesday will also be closely watched.

CANADIAN DOLLAR

The Canadian Dollar fell sharply on Friday after domestic GDP data fell short of expectations – annualised growth came in at just +0.4% versus +1.2% expected. USD/CAD rose to a two-week high in response at 1.3308.

Looking ahead, the Bank of Canada policy decision is due tomorrow with the benchmark rate seen on hold at 1.75%. The jobs report follows on Friday.

SWEDISH KRONE

The Swedish Krone emerged as one of the stronger G10 currencies last week, boosted by stronger-than-expected GDP and retail sales data released on Thursday. USD/SEK fell to a three-week low of 9.1676 before finding support.

Service PMI and industrial production figures are out tomorrow.

NORWEGIAN KRONE

Modest gains were seen midweek after stronger-than-expected retail sales and unemployment data. The Krone also rose in sympathy with the Swedish Krona after Swedish GDP surprised to the upside.

Looking ahead, house price data is due tomorrow followed by manufacturing production on Thursday.