Price action in the Euro, Swiss Franc and Australian and Kiwi Dollars was limited, with all four currencies ending the week broadly unchanged in trade-weighted terms. Central banks in G10 economies are on hold for the foreseeable future and this has contributed to muted volatility in most of major currency pairs.
Dollar
US macro data were mixed on the whole. Capital goods orders, a proxy for domestic investment, rose 0.4% mom in January but most indicators, including the NY Empire State manufacturing index, suggest that US GDP growth slowed in Q1 2019 and potentially quite sharply. Moreover, CPI-inflation came in weaker than expected in February and markets are now pricing 7bp of Fed rate cuts the Dollar lost 0.7%.
Sterling
The focus last week was on the three parliamentary votes, which went broadly as expected. On 11th March the House of Commons (again) voted against Prime Minister May’s draft Brexit deal with a significant majority, on 12th March the HoC voted in favour of the UK not exiting the EU without a deal and finally on the 13th the HoC voted in favour of seeking from the EU an extension to Article 50. Unsurprisingly Sterling was very volatile intra-day but ended the week up about 1.2%, with GBP/USD up to 1.327. Decent monthly GDP data for January of +0.5% mom and the UK’s strong fiscal position also seemingly provided some currency support.
