Dollar
The Dollar, which had been on a slow downward path, stabilised last week and managed to eke out a 0.5% gain in trade-weighted terms thanks in large part to weaker emerging market currencies. The breakdown in talks between US President Trump and North Korean leader Kim Jong-un and escalation in tensions between India and Pakistan contributed to a number of EM currencies, particularly high-yielders, losing ground. Moreover, US GDP growth of 2.6% qoq annualised in Q4 and stable core PCE inflation of 1.9% yoy in December were seemingly good enough for some Dollar bears to take profit on short Dollar positions.
Euro
Price action in the Euro was muted, with the trade-weighted index stuck in a narrow range despite Eurozone core CPI-inflation edging back to down to 1.0% yoy in February according to preliminary data.
Sterling
Sterling was one of best performing currencies last week, gaining 1% following Prime Minister May’s promise to allow the House of Commons to vote on 13th March against a no-deal Brexit and on 14th March in favour of extending Article 50 negotiations. The GBP/USD pushed through 1.33 mid-week but lost steam on Thursday and Friday, not helped by a weak manufacturing PMI number for February. The index of activity in the manufacturing sector slid to 52.0 from 52.6 in January.
Swiss Franc
The Swiss Franc was broadly unchanged last week, caught between two opposing forces. On the one hand geopolitical concerns in Asia and weaker EM currencies saw inflows into the safe-haven Swiss Franc.
But the weakness of the Swiss economy continues to weigh on the currency. GDP growth was a paltry 0.2% qoq in Q4 following a downwardly revised -0.3% qoq in Q3 and recent monthly data point to still weak growth in Q1 2019. Swiss retail sales contracted 0.4% mom in January – the third consecutive monthly contraction – while the KOF leading indicator dropped from 96.2 in January to 92.4 in February – its lowest level since mid-2015.
Australian and New Zealand Dollars
The Australian and Kiwi Dollars remained under modest pressure last week, shedding 0.6% and 0.4% respectively. The Australian Dollar is now down 1.7% in the past month, weighed down by mixed Australian macro data and ongoing signs of slowing Chinese growth and market concerns that the RBA could conceivably cut rates
