Weekly Market Watch emails

Week starting 22-04-2024

We have excluded the Russian Ruble from the analysis in our report due to the extreme volatility associated with the currency.

USD

• Over the past week we have seen the USD strengthen significantly against 14 of the top 19 currencies we monitor. The most outstanding gains were seen against the Mexican Peso (MXN) (2.70 %) and the ZAR (2.28 %), whilst a decrease was seen against the Swiss Franc (CHF) (-0.42%) and the South Korean Won (KRW) (-0.41%).


• On the data front, there was not too much to see. Retail sales in March came in slightly lower than expected at 0.7% for the US, with the NY Empire State Manufacturing Index also indicating a decline.


• However, housing data painted a diversified picture with building permits and housing starts registering unexpected drops, while industrial production remained steady.


• Speeches from Federal Reserve officials added to market sentiment, while crude oil stock changes and TIC flows hinted at shifts in investor behaviour. Overall, the market remained cautious amidst divergent economic signals and central bank commentary.


• Coming up this week we have quite a data-laden week, it all starts with durable goods orders for March. Here, the number is expected to be higher, which could indicate that further inflation is on the horizon.


• Next up, we have QoQ GDP data for Q1, this is expected to show some moderation from the previous quarter, but still strong at 2.5%. Last weekend we closely watched the Core PCE price index, the US Fed's preferred method to measure inflation, which is expected to remain consistent with the previous month, but any deviation from this will result in volatility. The USD's trajectory hinges on whether data aligns with expectations or veers of course, potentially stirring significant volatility in the FX markets.

EUR

• Over the past week we have seen the Euro strengthen against 15 of the top 19 currencies we monitor. The most prominent gains were seen against the MXN (2.86 %) and the ZAR (1.41 %), whilst the move indicating a decrease, were seen against the KRW (-0.27%) and the CHF (-0.27%).


• In the European Union, economic indicators during the week starting 15 April 2024, portrayed a mixed outlook. Industrial production rebounded in February, showing a positive growth of 0.8% following a previous decline. The highlight of the week was the inflation data, inflation remained steady at 2.4% year-on-year in March. Matching expectations but marking a slight decrease from the previous month – exactly what the ECB is trying to achieve.


• This week in the EU brings a cascade of pivotal economic indicators. Monday features insights into the fiscal landscape with releases on government budget to GDP and government debt to GDP for 2023, potentially shaping perceptions of economic health.


• Additionally, the flash estimate of consumer confidence in April offers a glimpse into sentiment trends. On Tuesday, attention shifted to the Purchasing Managers' Index (PMI) releases, encompassing both manufacturing and services sectors, shedding light on the current state of economic activity.


• Furthermore, ECB President Lagarde's speech could provide further insight into monetary policy considerations. These releases collectively offer crucial insights into the EU's economic trajectory and may influence market sentiments and policy decisions.

GBP

• Over the past week we have seen the British Pound strengthen against seven of the top 19 currencies we monitor. The most notable gains were seen against the MXN (2.08 %) and the Brazilian Real (BRL) (0.98 %), whilst the moves to the downside were seen against the CHF (-1.06%) and the KRW (-1.02%).


• In the UK, economic data released during the previous week highlighted mixed signals for the foreign exchange markets. Despite the unemployment rate remaining steady at 4.2% in February, employment change figures showed a substantial decline of 156,000, far below expectations. Inflation data for March depicted a slightly higher year-on-year rate at 3.2%, while core inflation moderated to 4.2%. These numbers are still rather high and it puts the UK consumers at risk of rates remaining higher for longer. However, retail sales figures for March were weaker than expected. This puts the BoE in a tough spot having to balance keeping inflation in check, but also ensuring growth in the economy.


• This coming week in the UK we don't have any major market moving data, but it should still be watched for surprise deviations. Tuesday, brings the flash estimates of the S&P Global Composite PMI, Manufacturing PMI, and Services PMI for April, offering comprehensive assessments of economic activity across sectors.


• Later in the week, Thursday sees the release of the CBI Distributive Trades survey for April, providing insights into retail activity. Finally, Friday concludes with the GfK consumer confidence report for April, offering valuable insights into consumer sentiment and spending intentions. The market will most likely be more focused on the US data than that of the UK to influence FX movements.

ZAR

• Over the past week we have seen the South African Rand strengthen against two of the top 19 currencies we monitor. The most notable gains were seen against the MXN (0.50 %) and the BRL (0.36 %), whilst the moves to the downside were seen against the Indian Rupee (INR) (-2.21%) and the USD (-2.17%).


• Data from South Africa was relatively limited, with the primary focus centred on inflation figures released on Wednesday. Inflation exhibited a slight decline both month-on-month and year-on-year. Additionally, retail sales demonstrated a modest increase on a month-on-month basis. Overall, the currency experienced significant depreciation over the past week, lacking any major catalyst except for a prevailing "risk-off" sentiment in the market. The escalation of tensions in the Middle East could be considered a potential factor contributing to the recent bout of weakness in the South African Rand.


• After the dramatic weakness from the previous week, we need to watch the ZAR closely as the weakness in the currency was largely unfounded. In part, it could have been investors removing themselves from any ZAR exposure prior to the elections, just over a month away. On the data front, on Tuesday the South African Reserve Bank (SARB) is scheduled to conduct its monetary policy review, where decisions and statements regarding interest rates and economic outlook could impact investor sentiment.


• Thursday brings updates on the PPI for March, both on a monthly and yearly basis, shedding light on inflationary pressures in the economy. These releases are key indicators of South Africa's economic health and could influence market movements and policy decisions in the coming days.

AUD

• Over the past week,  we have seen the Australian Dollar strengthen against six of the top 19 currencies we monitor. The most notable gains were seen against the MXN (1.98 %) and the BRL (0.68 %), whilst the moves to the downside were seen against the CHF (-1.17%) and the KRW (-1.08%).


• In Australia, the data from the last week was of little major concern, with the larger geopolitical issues in the Middle East playing a larger role in currency performance. Nonetheless, the employment change figures for March were unexpectedly negative, with a loss of 6,600 jobs, in contrast to the previous month's significant gain.


• The decline was particularly pronounced in part-time employment, while full-time employment saw a smaller increase. Despite the employment downturn, the unemployment rate remained relatively stable at 3.8%, slightly up from the previous month's figure. These divergent data points suggest potential challenges ahead for Australia's economy, influencing market sentiment and currency movements.


• This coming week in Australia we have quite a bit of data. Tuesday kicks off with the Judo Bank manufacturing, services, and composite PMI flash estimates for April, providing an early glimpse into sectoral performance. Wednesday brings a barrage of inflation data for Q1, including the year-on-year and quarter-on-quarter inflation rates, along with the CPI and various measures of core inflation.


• These releases will be closely watched for signals about price pressures and the Reserve Bank of Australia's (RBA) potential policy responses. Finally, on Friday, attention turns to PPI data, as well as export and import prices for Q1, offering further insights into inflationary trends and trade dynamics. These releases collectively offer a comprehensive view of Australia's economic landscape, guiding market expectations and policy decisions.

If you would like further information on the market along with personalised hedging strategies for you or your business, you can get in touch with our team at fxhedging@sableinternational.com.