When you pair two weak currencies against each other, what do you get? A sideways chop. That’s exactly what has happened to the Euro/British pound (EUR/GBP) currency pair for the past several months as data from both the Eurozone and the UK have been far from impressive. So far in the first half of 2018, macroeconomic pointers from the Eurozone have been poor with German data being particularly disappointing.
Stocks in Asia were uninspired by the slight gains on Wall Street during Monday trading. Although the easing of U.S.- China trade tensions was supposed to be positive for risk assets, the rise in global yields is making stocks less attractive.
This week will be lighter in terms of major scheduled economic events than last. That being said, there still be some potentially market-moving data to watch. Among other things, we will have the Australian employment report and GDP estimates from Japan and the Eurozone. So, the Aussie, yen and euro could all move sharply at various points this week.
Ahead of the Bank of England’s Super Thursday, the pound has found some much-needed support. It had fallen viciously for three weeks and the selling gathered pace ever since the Bank of England Governor Mark Carney strongly hinted at the prospects of no interest rate rises this month, owing to weakness in UK data.
Apart from the eagerly anticipated announcement from President Trump on whether the United States will pull out of the 2015 Iran nuclear deal, one of the most highly awaited events in the economic calendar this week will be the latest interest rate decision from the Bank of England (BoE).
U.S. equities rallied sharply at the end of last week as did the dollar, despite the NFP disappointment. The headline number for the rise in jobs came short of analysts’ expectations, “164K vs. 193K forecast,” but the previous month’s figure was revised up by 32,000. Average hourly earnings also came in below expectations, growing by 2.6% YoY. The bright spot was the unemployment rate which dropped to an 18-year low at 3.9%.