Currency price action in the majors last week was limited. The Dollar, Sterling, Swiss Franc, Australian Dollar and Kiwi Dollar were all marginally weaker while the Euro was broadly unchanged.
US GDP data for Q2 did little to move a range-bound Dollar while markets were seemingly a little disappointed that the European Central Bank has not changed its conservative stance regarding its medium-term policy outlook. In the UK, there was little data or news for markets to focus on ahead of this week’s Bank of England policy meeting.
Price action over the weekend was similarly negligible, with the Euro, Sterling and Swiss Franc making only incremental gains versus the Dollar.
US Dollar
US GDP growth in Q2 was strong (4.1% qoq annualised) but at the lower end of expectations and the risk is that US protectionist policies will slow growth in Q3 which in any case has tended to be weaker than in Q2 in recent years. This resulted in the Dollar losing a bit of ground, with the trade-weighted-index at the bottom of a six-week range despite markets pricing in a 42bp of Fed hikes before year-end.
Euro
The Euro TWI weakened back to the middle of a three-week range, unable to build on its June rally. The ECB re-stated at its policy meeting that it expected to hike rates after summer 2019 which should not have come as a great surprise given modest Eurozone growth and inflation. But Euro-bulls had seemingly expected a hawkish turn which, when it did not materialise, saw the Euro weaken about 0.3%. The meeting between US President Trump and European Commission President Jean-Claude Juncker in Washington to discuss trade seemingly went well with both sides showing a willingness to compromise but with President Trump tending to blow hot and cold and u-turning on key decisions markets rightly did not get carried away.
Sterling
Sterling was again treading water last week. There were tier-1 macro data for markets to focus on and the news-flow on Brexit was light. Prime Minister Theresa May has taken over Brexit negotiations with the EU but it is unclear whether this will translate into faster progress in the British government reaching a mutually-beneficial deal with the EU.
