The Dollar resumed its upward climb last week and appreciated further overnight to a new high since mid-2017 on the back of data suggesting that US GDP growth remained strong in Q2 2018.
Sterling appreciated slightly last week as markets re-set their expectations for a UK rate hike before year-end but has weakened in the past 24 hours.
The Euro weakened 0.3% last week and has lost further ground in today’s session but ultimately remains within a narrow trading range.
The Swiss Franc extended its gains for a third consecutive week and the currency is now at a five-week high. The Swiss data and event calendar is very light this week. Similarly the Australian and Kiwi Dollars made small gains last week.
US Dollar
The US Dollar trade-weighted-index (TWI) last week appreciated 1.6% to its strongest point since 21 June 2017, with robust US macro data keeping alive the possibility that the Federal Reserve may still hike rates three more times before year-end. The Dollar has started the week on a strong footing following news that President Trump has for now put on hold any protectionist measures against China in exchange for an admittedly vague Chinese promise to increase its imports from the US.
Sterling
The Sterling TWI was up 0.9% between 11th and 17th May with markets attributing an almost 50% probability of a 25bp rate hike at the Bank of England’s August meeting. But Sterling has since shed 0.3% and is likely to remain sensitive to macro data releases, including this week’s April CPI-inflation and retail sales figures, and to Brexit-related developments.
Euro
The Euro continues to move at a glacial pace, with a bias towards modest depreciation given growing evidence that Eurozone economic activity continued to slow in recent months. The European Central Bank is likely to continue to lean against the Euro via verbal intervention and the key question now is whether it will as a result decide to extend its QE program beyond September.
Swiss Franc
The Swiss Franc is now up 1.6% since 11th May having fallen to within 3% of its pre-2015 revaluation level. While the Swiss Franc seems to have lost its safe-haven characteristics, markets may have taken solace from signs, even if tentative, that Swiss economic growth has bottomed out and assessed that the Swiss Franc was looking attractive at these levels.
