Dollar
The Dollar continued to slowly climb last week, gaining 0.7% in trade-weighted terms despite decidedly mixed US macro data. The ISM non-manufacturing PMI surged three percentage points in February and there was better news for the housing market. But the US trade deficit widened further in December and the US economy created only 20,000 jobs in February – well below the consensus forecast of 181,000. Markets have seemingly interpreted the data as the US glass being half-full but the Dollar, having on Thursday hit its highest level since early January, has largely traded sideways in the past four sessions.
Euro
Euro volatility spiked following last Thursday’s ECB policy meeting statement which promised a new round of ECB long-term loans to commercial banks (broadly in line with expectations) and perhaps more unexpectedly said that the Eurozone’s central bank would most likely not hike rates this year. This dovish turn, sparked by the gloomy outlook for already weak Eurozone growth, caught markets off guard and the Euro dropped 0.5% following the announcement before almost fully recovering the next day. Nevertheless, the Euro – which has been on a slow side for the past few months – ended the week about 0.6% weaker.
Sterling
Sterling had a good run in February, appreciating nearly 2%, but it started to weaken on the last day of the month and slid a further 0.7% last week to a 12 session low despite a stronger-than-expected services PMI print of 51.3 in February. Markets have been eyeing this week’s critical parliamentary Brexit vote(s) and uncertainty has seemingly once again crept into their psyche.
Swiss Franc
There was little for markets to go on last week, with Swiss CPI-inflation in line with expectations in February at 0.6% yoy, and the Swiss Franc mostly treaded water.
Australian and New Zealand Dollars
The Aussie Dollar was broadly unchanged last week. While a number of data prints, including building approvals, the services PMI and trade surplus, surprised on the upside, markets had to contend with the release of weak Australian Q4 GDP growth of only 0.2% qoq, very soft Chinese trade data and an RBA policy statement which failed to rule out a policy rate cut. Markets are currently pricing in a chunky 32bp of rate cuts over the next 12 months.
There were no notable data releases in New Zealand and the Kiwi Dollar managed to etch out a small 03% gain in trade-weighted terms.
