Weekly Recap 21st October – 27th October

28th October 2019

Volatility in major currencies was subdued last week as markets await tangible developments in the ongoing US-China trade war and on the Brexit issue and focus on this week’s key Fed policy meeting. The lack of tier-one macro data releases also likely contributed to modest price action but emerging market currencies were on the whole stronger and the S&P 500 on Friday matched its all time high.

The Dollar trade-weighted index was broadly unchanged, trading in a very narrow 0.4% range. 

Sterling, which had hit a 5-month high on 18th October, weakened 0.7% last week with Brexit still driving price action. The EU agreed to again delay Article 50 negotiations but has yet to specify the length of the delay while Prime Minister Johnson is pushing for an early general election. Parliament is due to vote today on whether to bring forward a general election currently scheduled for May 2022 but it remains unclear whether the required two-thirds of MPs back this move.

The Euro also weakened 0.7% to its weakest level since end-July. ECB President Draghi, who chaired his last policy meeting on 24th October, painted a bleak growth and inflation outlook for the Eurozone which added to the pressure on the single currency.

The Swiss Franc was down 0.5% in trade-weighted terms last week and has weakened a further 0.2% in the past 48 hours to its weakest level since 26 July. This may at the margin remove the pressure from the SNB to following in the ECB’s footsteps and cut its policy rate.

The Australian and Kiwi Dollars both depreciated about 0.4%, with the Kiwi Dollar moving in somewhat broader ranges than other major currencies.