Today's data releases
 Key levels
09.00EU Eurozone Markit PMIs   
14.45US Markit PMIs Support
15.00EU ECB's Coeure speaks
15.00US existing home salesGBP/EUR

Market overview

Last week was a tale of two halves for the Pound. Against the Dollar, Sterling climbed to a new post-Brexit high (1.4377) in the first part of the week, before retracing to the low 1.40s. Similarly against the Euro, the Pound reached 1.1600 before finding itself back in the 1.13s on Friday.

A combination of soft data and words from that ‘unreliable boyfriend’ Mark Carney caused the Pound’s bubble to burst last week. On the data front, wage growth inflation missed expectations (2.8% vs. 3%), UK CPI inflation was softer than expected (2.5% vs 2.7%) and UK Retail Sales disappointed too (-1.2% vs -0.6%). So when Mark Carney decided to come to the party, suggesting that a May rate hike was not a done deal, it was the final nail in the coffin for the Pound’s rally. Within a blink of an eye, all those optimistic Dollar buyers holding out for the magical 1.4500, were now left scratching their heads, as the 1.30s looked an ominous reality once again.

It was further bad news as Brexit talks weighed on Sterling with the Labour party suggesting they hadn’t ruled out supporting a second referendum. However there was some respite thanks to hawkish comments from BoE’s Michael Saunders. In contrast to what Carney said, Saunders suggested that a May hike was certainly on the cards as was a further rate hike in 2018. He said the word “gradual” did not imply low frequency rate hikes, such as once per year. Michael Saunders, however is a notorious hawk - recall he was one of two BoE members to vote for a hike at the March meeting.


Nonetheless, as Sterling plunged, the Greenback on the other hand had its biggest weekly gain since February, buoyed by a combination of higher 10 year Treasury yields - risk off trading and levered accounts sold EURUSD into Friday’s New York trading session. In other news the Canadian Loonie fell amid soft Canadian economic data - flat retail sales and Core CPI missing expectations slightly. Oil Prices fell 1% before paring the drop after Trump criticised OPEC on Twitter saying that crude prices are “artificially very high”. As for the Trade War, over the weekend Steven Mnuchin said he’s considering a trip to China to help ease tensions. Another weekend development that could cheer up the mood at the open of trading on Monday is that we received the news that North Korea has suspended nuclear tests. 

The week ahead

The week ahead will be a quiet one for the UK data releases. However there is a raft of US data out. Today we have US PMI data (Manufacturing, Services and Composite) and US Existing Home sales too. In Europe we have PMIs today too, but the week’s big events will be the ECB on Thursday and UK GDP on Friday. Have a good week everyone!

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