The overall theme last week was one of marginally weaker global risk appetite.
The “safe-haven” Dollar and Swiss Franc were broadly unchanged in trade-weighted terms but the more risk-sensitive Australian and Kiwi Dollars were down respectively 0.4% and 1.1% and the S&P 500 ended the week down 1.5%. The bulk of its losses (1%) were recorded on Thursday-Friday, with weak US macro data again pointing to a sharp slowdown in US GPD growth in Q4 and early 2021 arguably not helping. The $-value of US retail sales contracted 0.7%mom in December while the New York Fed Empire State manufacturing index fell further in January to 3.5 – its weakest level since June.
The other standout development was Sterling’s outperformance and Euro’s underperformance. The GBP/EUR cross rallied a further 1.3% last week, at one point on 14th January trading as high as 1.1272 (its strongest level since 11th November). This trend was partly driven by the relative pace of vaccination in the United Kingdom and the Eurozone, with the UK maintaining a healthy lead over its European counterparts. For example the UK has to date given a first dose of the Covid-19 vaccine to about 3.8 million people versus only 100,000 in France. The GBP/EUR cross did dip slightly on Friday after data showed that UK GDP had contracted 2.6% mom in November and has since weakened further to 1.121 at time of writing.
