Daily Currency Update

Get access to our expert daily market analyses and discover how your currency has been tracking with our exchange rate tools.

Weekly market wrap-up

Treasury Team

Theresa May’s leadership has come under mounting pressure after a week of shifting Brexit policies. First, she announced that MP’s failing to vote for her deal were to blame for the current Brexit scenario and then she raised the prospect of a no-deal Brexit on March 29th only to accept an offer from EU leaders to delay UK’s exit until at least April 12th. She cannot be formally challenged until this December after a failed party coup last year.

Attorney General William Barr has concluded that Robert Muller’s report was unable conclude on whether Trump obstructed Justice as well as finding no conclusive evidence that the Trump campaign colluded with Russia. Trump stated that the two yearlong investigation has been an “illegal takedown that failed”.

After the Bank of Japan flagged risks on the country’s industrial production and exports last week, its manufacturing results for March fell at their fastest pace in almost three years coming in at 48.9 (the 50-point level separate’s expansion from contraction). The Eurozone’s economy also remained under pressure as the Purchasing Managers Index for Manufacturing fell to 47.7 (weakest figure in five years). Even more dramatic were the manufacturing results for Germany, Europe’s industrial powerhouse, coming in at 44.7, its lowest level in six years.

Global growth concerns sparked into Friday’s US session igniting a risk-off move that saw yields in Japan and Germany dropping into negative levels not seen since September 2016. The S&P Index lost almost 2%, and the Volatility index climbed more than 20%. The US Curve inverted temporarily, with 3-month rates trading at a higher yield than 10Yr Treasuries, something that hadn’t happen since 2007. The moves followed Wednesday´s dovish FED, which signalled it would refrain from raising interest rates for the rest of 2019. Markets are now pricing a 60% probability of a 2019 rate cut.

Although currencies were also impacted, the USD closed higher despite the move lower in yields across the curve. Further looking into the details, USD resilience was mainly supported by Euro weakness, but the greenback didn’t perform well against the JPY. AUD and CAD ended the week softer impacted by weak commodities (crude and oil).