Good afternoon,

The week ahead in GBP

With the government’s Brexit plan once again defeated in the House of Commons, it is little wonder that a fair amount of fatigue has crept into sterling in the past few sessions. The lack of a deal or a viable alternative – at the very least one that commands a majority in the House of Commons – is a risk to sterling in the coming weeks with the no-deal date merely shifted from March 29th to April 12th.

If a Commons consensus for an arrangement that is softer than the government’s current stance were to emerge then that could offer sterling some positivity although the government is under no obligation to pay any attention to today’s indicative votes.

While the data calendar is packed this week with PMI sentiment surveys from the UK’s manufacturing, construction and services sectors, it would take some very strange readings for the economic data to become more important to the path of sterling than the political atmosphere. Monday’s manufacturing data showed a large amount of stockpiling by the British manufacturers in a bid to smooth out possible supply issues. We expect both the services and construction numbers to be affected by a lack of investment.

The week ahead in USD

As the US economy starts to forget about the shutdown at the beginning of the year, we may be close to getting a true look at both the size and strength of the US economy. Last week’s initial jobless claims numbers showed that fewer and fewer people were claiming unemployment insurance and that will generate expectations that Friday’s payrolls release will see a strong recovery from last month’s horrendous figure of 30,000.

Trade talks between the US and China also restart in Washington on Wednesday and a strong data picture and positive outlook from Washington may be enough to allow riskier assets to continue their drive higher.

As we have noted many times in the past, given the relative yield and the USD’s position as a haven currency, investors need to have a really good reason to sell the greenback and given the wider backdrop of uncertainty, we think that the investment community remain happy to back the dollar for the foreseeable future.

The week ahead in EUR

2019 continues to be a tough year for the single currency, trapped between weak data, a strong dollar and the interminable back and forth of Brexit. The continued dovishness from the European Central Bank and the poor data outlook – German manufacturing sentiment falling to the weakest in 10 years this morning – will likely keep the pressure on the single currency this week, culminating with the latest minutes from the European Central Bank this Thursday afternoon.

We would expect them to back up the recent concerns over bank profitability in the region as well as the weakening chances of a recovery in growth and inflation prospects.

The week ahead in CNY

This week’s market movements started positively courtesy of news from China with the Chinese yuan and other trade focused currencies – NZD, AUD & SGD – all higher this morning following two positive pieces of news.

Chinese manufacturing sentiment rebounded in March alongside other key manufacturing indicators in a show of stabilisation for the region. Trade numbers have also improved of late which offers some hope that should a trade deal be agreed between the US and China then the worst may be over for the country’s outward-looking industries.

To that point, China also announced that they would continue the suspension of retaliatory tariffs on US car imports as well as agreeing to add the drug fentanyl to the list of banned substances.

The week ahead in JPY

The yen has started the week on the back foot following a poor Tankan survey of industrial sentiment. Sentiment surveys are not an exact science by any stretch but a fall to the lowest level in six years is cause for concern. The greater issue will come when we receive the latest set of corporate earnings numbers in two or three weeks and the hope will be that if China really is over the worst then that may be enough to help the Japanese economy as well.

In the meantime, Tuesday’s look at corporate inflation is the next hurdle for the yen and a weak number here could easily see markets pressure the yen lower.

The week ahead in AUD and NZD

Overnight tonight the Reserve Bank of Australia will meet and decide on their latest interest rate policy. It is widely expected that they will keep rates on hold although weak data and pressures elsewhere in the global economy have heightened the risk that the Bank decides to make borrowing cheaper.

If they hold off then we would expect to walk in tomorrow with a slightly higher AUD although we must be wary of any guidance from the Bank that points to weakness in its future outlook.

The NZD dived last week after the unexpectedly dovish notes from the Reserve Bank of New Zealand. The RBNZ left their policy rate unchanged at 1.75%, as expected, but surprised markets with their statement by saying that the “more likely direction of our next Official Cash Rate move is down.”

The catalyst for the change is more international than domestic and is largely down to the slowing of the global economy not that of New Zealand’s intrinsically. The RBNZ also noted that its trading partners are slowing and there was, therefore, a reason to worry about overly strong moves in favour of the NZD.

The weak ahead in SGD

It may sound like an April Fool’s but April is not a good month for the Singapore dollar; in the past ten years, the SGD has ended April lower than it started in nine of those years. Next weak will see the latest semi-annual statement on monetary policy by the Monetary Authority of Singapore. Given the softening of inflation and the news that the Federal Reserve is now on pause, it seems a very easy decision for the MAS to leave things as they are.

Have a great week.