Good Morning, Sterling had a relatively quiet time last week, mostly avoiding the buffeting that other currencies received from the resurgent dollar. As was expected, markets were dominated by central bank speakers, who took to the stage nearly every day.
Dominating the market were the thoughts of Federal Reserve Chairman Jerome Powell, who again projected a mood of benign neglect over the prospects of inflation roaring ahead, instead choosing to focus on the importance of achieving full employment.
For the time being, the markets seem content to accept this potential trade-off, and the dollar gained around a cent on the euro, pushing it to $1.1775 against the single currency, where it has opened this morning.
We have holiday-shortened weeks ahead of us for the next fortnight, as the Easter Holidays start, which will come as a welcome relief to many after a tough first quarter. With month and quarter-end on Wednesday, there could be more volatility than usual as large institutors rebalance their portfolios. This volatility will be exacerbated by the extra-long weekend ahead, and we will be watching this for its impact on an already weakened single currency, which could be particularly vulnerable as lockdowns continue to spread and there appears no end to the chaos over the vaccination programme. Also adding to the volatility will be that Europe is closed on Friday when the US releases the critical employment metric of Non-Farm Payroll. In light of these factors, we suggest that you contact your account manager early in the week if you have any requirements over the coming weeks.
Thanks to the vaccine dividend, Sterling was mainly on the side-lines last week, holding broadly steady and has opened this morning €1.1688 against the euro. The data that was released was mixed and still distorted by the latest lockdown. With the first relaxation of social mixing rules today allowing us to circulate more, some economists, including BoE chief economist Andy Haldane, expect the start of a mini-boom over the summer, which has encouraged investors to buy the pound. As the vaccination programme continues, the government’s roadmap is seen as increasingly realistic, and at present, sterling appears the least vulnerable of the G10 currencies. The week ahead is quiet for speakers, with only Michael Saunders and Silvana Tenreyro from the Bank of England slated to speak. On the data docket, we have Consumer Credit tomorrow and 4th Quarter GDP released on Wednesday.
Easter holiday’s start this week with much of Europe facing continuing lockdown measures which in several regions are getting stricter. The euro continued to suffer last week from the Eurozone’s incoherent policies over vaccines and vaccination, which has seen less than 10% of the population inoculated, and it looks set to endure some further setbacks this week. With travel to and within Europe severely restricted, the tourist industry faces another disastrous summer unless the third wave slows and vaccinations speed up dramatically. In the coming week, we will be watching this morning’s Business Climate. Tomorrow March’s Economic Sentiment and Consumer Confidence data for the Eurozone are published. On Wednesday, German unemployment data is released, as is the Eurozone Consumer Price Index. The shortened week closes out on Thursday with Purchasing Managers Indexes across the continent and German Retail Sales.
The coming week will see President Joe Biden start to push his $3trln “Build Back Better” programme. He is scheduled to outline this plan tomorrow in Pittsburgh, and we will be watching for any reaction by the markets to it and its potential inflationary impact. It’s predicted to be broadly well received, and the dollar should benefit from the positive effect on the economy. As usual in Spring, we entered British Summer Time over the weekend and are now an extra hour ahead of the US markets, and data releases are now an hour later in the day. As always, in the last week of the month, unemployment updates will dominate the data docket starting on Wednesday with ADP’s take on white-collar employment. These are followed on Thursday by the weekly jobs number, and finally, whilst we are enjoying Good Friday, the Non-Farm Payrolls report is released. Hopes are high for a good number, with the headline rate possibly dipping below 6%. Aside from the jobs data, in common with the rest of the world, ISM Purchasing Managers Indexes are released on Thursday.
It was a somewhat uneventful week for the Swedish krona, which ended the week slightly weaker than it began. The Riksbank expects inflation to fall short of the 2% target through to March 2024, which has increased speculation that the krona may be rangebound for a more extended period than the market initially expected at the beginning of the year. This week sees no major data releases apart from the Economic Tendency survey, a critical gauge that is expected to have expanded to 105 from 103. Easter starts on Thursday afternoon with a half-day across the banking world and the financial markets.
The Norwegian krone’s week followed its neighbour’s trading pattern, and the political fall-out from Prime Minister Solberg’s misstep from two weeks ago has calmed down. This week sees no major data releases, and Easter starts on Thursday with the banking system and financial markets shut.
Have a great week!