Dormant currency markets finally came to life last week.
Sterling, which appreciated 0.9% the previous week, gained another 1.2% with markets increasingly confident that the ruling Conservative Party will win Thursday’s general election with a comfortable parliamentary majority. Upward revisions to UK PMI data for November also seemingly helped. The GBP/USD cross rallied above 1.31 for the first time in seven months while GBP/EUR breached the 1.19 threshold overnight for the first time since the June 2016 referendum.
The Euro had a roller-coast week, ending down 0.2%. The Eurozone currency temporarily hit a one-month high on 2nd December but then gave back all its gains and more during the week in the face of soft German data, including another weak set of industrial output figures. The safe-haven Swiss Franc followed a similar trajectory, weakening in the second half of the week as markets took comfort from signs that the US and China may still sign a Phase-One trade deal before the 15th December deadline.
The Australian Dollar was up 0.8% last week after a strong start which quickly petered out after the RBA policy meeting on 3rd December. The central bank left rates on hold as expected but markets are still pricing in rate cuts in the face of mixed macro data. Australian GDP growth was a tad weaker than expected in Q3 at 0.4% qoq , the trade surplus narrowed to AUD 4.5bn in October and retail sales were flat on the month. Australia is still running a sizeable trade surplus at a time when global growth and trade are slowing but the domestic economy is not proving as robust.
The Kiwi Dollar was the outperformer last week, appreciating 1.8% to a four-month high. Kiwi exports are benefiting from Chinese imports of food-products as a result of the African swine flu and the New Zealand domestic property market has picked up. The AUD/USD cross has slumped to 1.041, its weakest level since early August.
