The Dollar Index inched higher yesterday morning to 97.6 having declined on Friday’s jobs report as soft wage data overshadowed a strong non-farm payrolls print (+263,000) with the unemployment rate falling to 3.6%, a 50-year low.
The Trump administration continued to raise the temperature in trade tensions with China yesterday, with top trade official Robert Lighthizer confirming a Twitter threat of increased tariffs as official policy. “We felt like we were on track to get somewhere, but over the course of the last week or so we have seen an erosion in commitments by China,” Lighthizer told reporters. China’s chief negotiator, Liu He, will visit Washington this week to continue talks.
Along with Jerome Powell’s speech on Thursday, PPI on the same day and Friday’s CPI data will also be closely watched.
The Bank of England stood pat on policy last week and the pound was relatively unfazed although jumped on Friday on some supportive Brexit related commentary. This has been downplayed over the weekend however by opposition lawmakers which saw GBP/USD pull back towards 1.31 from Friday’s multi-week high at 1.3178.
The local elections last week also confirmed what we already knew; the Tories and Labour have both lost considerable ground and are now scrambling to get Brexit ‘’done’’. According to the Financial Times this week, the big two parties share of the vote in the European elections will fall below 50%, possibly down to the mid-thirties, meaning they would be on par with Nigel Farage’s Brexit party and the combined votes of the Remain parties. To discuss the impact that the aforementioned may have on Brexit, please speak with your dealer or call the switchboard on 020 3876 5432.
Looking ahead, Friday’s Q1 GDP data will be the main data focus this week.
The Euro has seen a steady start the week with minimal movement versus the US Dollar as it attempts to make a sustainable move above the 1.12. Friday’s stronger-than-expected Euro Zone CPI data provided some support although yesterday’s PMI and retails sales came in around forecast.
No data releases of note for the remainder of this week.
The Japanese Yen begun the week as the strongest of the G10 currencies, boosted by safe-haven demand as risk sentiment soured amid an escalation in the US-China trade dispute. USD/JPY sunk to a fresh one-month low of 110.28 this morning with Japanese markets opening again today after an extended public holiday.
The Bank of Japan release their meeting minutes tomorrow.
The Swiss Franc has edged higher yesterday, supported by safe-haven demand as risk sentiment soured amid an escalation in the US-China trade dispute. EUR/CHF declined to a fresh one-week low of 1.1361 having topped out at 1.1446 last Tuesday. Recent data impulses have been less than supportive meanwhile with soft readings for KOF, retail sales and SVME PMI.
Looking ahead, a quiet week in terms of data with unemployment the sole release tomorrow.
NEW ZEALAND DOLLAR
The Dollar had shown some impressive resilience last week despite tepid jobs data although faces a sterner test tomorrow where the RBNZ could cut the official cash rate (OCR) to historic lows, or at the very least deliver a dovish hold.
NZD/USD touched a daily low today of 0.6593, its lowest level since April 24th.
April PMI on Thursday is the only data release this week.
Swedish service PMI for April declined yesterday and will have contributed to EUR/SEK climbing to a fresh eight-month high at 10.7262.
EUR/NOK flirted with 9.8 but failed to sustain a move above this level towards the end of last week where weak manufacturing PMI data had provided a weight.
Looking ahead, the Norges Bank policy decision on Thursday will be the main focus for investors this week ahead of Friday’s CPI report.