The US Dollar weakened a further 0.5% in trade-weighted terms last week to a 2-month low, with the 3bp fall in 10-year US Treasury yields seemingly weighing on the safe-haven Dollar’s appeal. However, the S&P 500 failed to benefit from slightly lower US government bond yields, closing down 0.1%.
Conversely the Euro outperformed, gaining 0.5% and hitting a two-month high on Friday. The European Central Bank policy meeting was uneventful, with the Eurozone central bank leaving its policy rates and the modalities of its asset-purchase program unchanged as expected. However, the tone of the ECB statement and President Lagarde’s press conference was moderately more upbeat. Moreover, the Eurozone flash Composite PMI confounded analyst expectations by rising to 53.7 in April from 53.2 in March and pointing to a modest pick-up in economic activity in the first half of April.
Sterling had a choppy seven days. It rallied on Monday but weakened in the subsequent sessions to end the week down 0.2% although it has rebounded 0.4% since Friday. The GBP/EUR and GBP/USD crosses have edged back above 1.15 and 1.39, respectively, at time of writing.
Markets, which maintained still substantial long-Sterling speculative positions last week, were seemingly unconvinced by strong UK macro data released on Friday. The volume of UK retail sales surged 5.4% mom, the strongest monthly rate in nine months, with the re-opening of schools early in the month having seemingly facilitated household consumption. Moreover, the “flash” (i.e. preliminary) composite PMI jumped to 60.0 in April from 56.4 in March, its highest reading since November 2013. Economic activity in manufacturing and in particular the crucial service sector surged in the first half of April, thanks to the re-opening of non-essential retailers and partial reopening of restaurants and bars on 12th April.
Antipodean currencies had contrasting fortunes, with the Australian Dollar shedding 0.4% while the Kiwi Dollar gained 0.3%. Both have made small gains in the past 48 hours. The Swiss Franc was for the second week running broadly unchanged in trade-weighted terms.
