Dollar
The Dollar weakened across the board last week, depreciating 1.1% in trade-weighted terms to a two-month low. The Dollar has faced multiple headwinds, including the market’s aggressive pricing of 75bp of Fed rate cuts before year-end and a rebound in global risk appetite (and new record high for the S&P 500).
Euro & Sterling
The Euro and Sterling were broadly unchanged last week. While they appreciated versus the Dollar by respectively 1.4% and 1.2%, they weakened versus other European currencies and high-yielding emerging market currencies (the latter buoyed by expectations of Fed rate cuts and possible thawing of US-China relations at this week’s G20 meeting).
The German IFO business climate index for June, released this morning, came in line with expectations at 97.4 in June. The index, on a downward trend since August, averaged only 98.2 in Q2, down from 99.1 in Q1. The monthly German ZEW economic sentiment index averaged -6.7 in Q2, up only marginally from -10.7 in Q1. IFO and ZEW data would suggest that German GDP growth may have treaded water in Q2 after bouncing back to 0.4% qoq in Q1 2019.
In the UK, the leadership contest for the ruling Conservative Party and premiership ended with Boris Johnson and Jeremy Hunt vying for the top spot after a series of internal party ballots. Johnson, the former foreign secretary, is currently seen as the front-runner to succeed Theresa May who officially resigned on 7th June. Of the two candidates, he has taken the hardest line on Brexit, arguing that the UK should exit the EU on 31st October with or without a deal. Foreign Secretary Jeremy Hunt is in favour of the UK exiting the EU but would be willing to consider a further shot delay to Article 50 negotiations if required.
Australian and Kiwi Dollars
The Kiwi Dollar remains very volatile. It depreciated 1.8% in trade-weighted terms last week but has in the past 48 hours recouped most of its losses. Similarly, the Australian Dollar weakened 0.3% but has since appreciated to a seven session high.
