Dollar
The Dollar, which had hit a five-week-low on 11 June, ended the week fractionally higher in trade-weighted terms. It posted decent gains versus the Euro and Sterling (1%) and in particular the more risk-sensitive Australian Dollar (1.8%) and Kiwi Dollar (2.6%) but depreciated against the Mexican Peso and Latin American currencies. Markets have upped their pricing of Fed rate cuts for 2019 from 63bp (on 11 June) to about 66bp but have turned even more dovish with regards to other developed economy central banks.
Australia and New Zealand
Markets are now pricing the RBA to cut rates 25bp to 1.00% at its August policy meeting and have upped their pricing of another RBNZ rate cut, although analysts are more divided as to whether the RBA and RBNZ will cut rates again in coming months. Macro data out last week in Australia and New Zealand were at best mixed. The Australian economy created 42,300 jobs in May – a 9-month high – but only 2,400 of those were full-time jobs, only a modest improvement from April when full-time employment fell by 6,300. In New Zealand the manufacturing PMI fell 2.5 points to a 6-year low.
Sterling
Sterling weakened a further 0.4% in trade-weighted terms last week to a new low for the year, dragged down by weak GDP data and ongoing Brexit-related concerns. Labour market data were on the whole decent in April but this did not stop GDP contracting 0.4% mom and markets seemingly ignored hawkish comments by a number of Bank of England MPC members. The race to replace Theresa May as Conservative Party leader and prime minister started last week, with now only six candidates left.
Euro
The Euro, which was one of the best performers in the week ending 7th June (+0.7% in trade-weighted terms), gave up all its gains last week, with EUR/USD now hovering just above 1.12.
