Good morning,
The week ahead in GBP
With politicians back in their constituencies and Westminster now quieter than I can remember it being for a number of months, sterling’s focus will shift, albeit briefly, back onto the economic data as opposed to the back and forth of what is being said about Brexit. Whether this week will be good or bad for the pound will depend largely on whether Tuesday’s jobs numbers, Wednesday’s inflation figures of Thursday’s retail sales results show progress or, more likely, stagnation.
There is little reason to suggest a change in unemployment over the past month or so, although we will have to make sure that any new work is being created with a continuation of the wage gains that have been seen in recent months. Similarly, given the quiet pound, a lack of corporate pricing power, a stable wage picture and moderate increases n the price of oil, the inflation picture is also set to be quiet in March.
The impetus for some sterling movement could easily be Thursday’s retail sales announcement. Spending has stayed supported in the past few months but consumers lacked a reason to spend money in March especially given the late Easter and credit card spending data that has shown a runoff in the amount committed to the collective plastic.
The week ahead in USD
The week for the US dollar is all about how well the collective US corporate world did in the first quarter of this year with the latest round of earnings reports due. Everyone from banks to retailers, tech companies and healthcare providers will report how much money they made in the first three months of this year and while equity markets have been chewing higher, the outlook for these household names is not particularly strong.
Last week saw good economic data globally and low volatility in wider asset markets see investors plump for a bit more excitement than simply holding the US dollar. A good earnings cycle will see that impulse continue especially if the economic picture globally continues its path of improvement. However, I am always reticent to write the USD off especially given the knife-edge that both US/China and US/Europe trade relations are currently sat upon.
The week ahead in EUR
We entered this year bullish on the euro and, finally, it looks like we might be able to start banking some protracted gains on the single currency soon. The first quarter was tough but the data cycle looks like it has started to bottom out and the delay on a no-deal Brexit until October has also helped.
The key thing for the euro this week will be Thursday’s run of preliminary PMI data that will be able to offer confirmation of sorts that sentiment in both the manufacturing and services sectors in various Eurozone countries are starting to turn higher. Good Friday could, therefore, be very good for the Euro.
The week ahead in CNY
The yuan found support last week amongst strong trade and credit data but this week brings fresh hurdles for the CNH to clamber over. It is widely expected that GDP in Q1 will have been the softest reading for a number of years and a poor number alongside weaker investment measures could very easily undo a lot of the good work and gains seen both locally and globally last week.
Alongside the news from the US corporate sector, these announcements from China represent the most important data this week.
The week ahead in JPY
There is a lack of domestic influences on the JYP this week and so we expect the yen to take its cues from the global risk environment once more, a scene that will largely be dominated by earnings announcements from the US and the wider concerns around global trade given both US/China and US/Europe trade relations are in the news.
Next week marks the beginning of the Golden Week bank holidays in Japan and other parts of Asia and we may see investors, particularly those of a retail background, move out of positions ahead of 10 days away from their screens. This could easily see the JPY strengthen as carry trades that originally saw investors sell the yen, buy it back to square their positions.
The week ahead in AUD and NZD
Both the AUD and NZD have been subject to a substantial amount of expectation that the global economic backdrop may soon be poor enough for either or both the Reserve Bank of Australia/New Zealand to cut interest rates at some point in the near future. The turnaround in the economic data in the past week has made those changes a little less likely, allowing both the AUD and NZD to push higher.
We expect both the latest Australian jobs numbers and the upcoming NZ inflation report to change little at the margin and the wider global backdrop to move these currencies as we head into the Easter break.
The week ahead in SGD
The Monetary Authority of Singapore kept its exchange rate-based monetary policy unchanged last week after tightening twice last year, disappointing some people – ourselves included.
In the accompanying statement of its semi-annual policy review, the central bank said it will maintain the current rate of appreciation of the Singapore dollar’s nominal effective exchange rate policy band.
Have a great week.