SMATS FX is proud to provide our weekly analysis of currency markets and exchange rates.
USD
- Major USD weakness at the end of last week following dismal employment data in the form of Nonfarm payrolls.
- Adds weight to the thoughts that the US Fed will keep rates lower for longer, thus USD weakness likely to continue for the time being.
- Coming up on Wednesday we have US Inflation data, which is expected to increase – this would generally help the USD, but with the disappointment of NFP on Friday it might not help as much.
- On Friday we have US Retail sales, this is expected to drop and would be USD negative.
HKD, SGD & AED
- Both the Singapore and Hong Kong Dollar experienced a pull-back in the markets last week, as the result of a flimsy US Dollar. GBP/SGD and GBP/HKD pairs appreciated by 0.73% and 1.13%, respectively. The UAE Dirham experienced similar price action, with the GBP/AED pair appreciating by 1.15% and closing the week at 5.1315.
- Last week in Singapore, Retail Sales growth came in at 3%, after February saw a MoM decline of 1.5%. The reading exceeded analyst expectations of a 0.8%, pointing towards improving economic conditions for the region. SIPMM Manufacturing PMI edged higher to 50.9 in April of 2021, from 50.8 in the previous month, pointing to the tenth consecutive month of expansions in factory activity.
- Growth prospects in Hong Kong continue to improve. Last week, GDP Growth Rate for Q1 of 2021 came in at 5.3%, exceeding previous Quarter-on-Quarter growth of 0.5%. Retail Sales for March were released and increased by 19.8%. This uptick comes after February saw retail sales rise by 31.6%, the first rise after 24 months of straight decline.
GBP
- The United Kingdom remains on track to fully re-open by mid-June and recover to pre-pandemic levels sooner than expected. The Bank of England has revised their GBP forecasts upwards and are expecting the U.K economy to experience 7.25% growth in 2021.
- The central bank announced their decision to hold rates at 0.1% in April, after the unanimous vote to do so in March. Bond-Buying will remain at £875 billion.
- Construction PMI stood at 61.6 in March, after reaching a six-and-a-half year peak of 61.7 in April.
- Sterling pushed back against the faltering US dollar, which saw the Dollar Index fall by 1.15%. The GBP/USD kicked off the week around the 1.3825 mark before pair rising and trading around the 1.3970 level, resulting in a 1.14% appreciation for the currency pair.
- Next week, Balance of Trade for March will be released. The U.K trade deficit is expected to rise to £8 billion. This widening of the trade deficit comes after the region reported a deficit of from £7.1 billion in February. Imports advanced by 12.9%, while exports experienced relatively slower growth, of 5.4%. GDP growth for Q1 of 2021 will also be released next week, which is expected to come in at -4%.
EUR
- This week saw positive data come from the EU. Market Manufacturing PMI picked up slightly to 6.9 in March (from 6.5 in Apr). This coincided with a higher market composite index of 53.8. All this is indicative of expanding economic activity. It is also telling to note that the German (the biggest EU economy) balance of trade came significantly higher (20.5 billion compared to 18.2 billion) than the previous month.
- Despite the positive fundamentals, we still saw the EUR lose ground against the GBP for most of the week, with a low at EUR/GBP 0.862 on Wednesday from a 0.871 open on Monday. The EUR started trending positive on Thursday, closing at 0.868. Volatility remained the order of the day as the currency ranged between 0.868 and 0.866 for the rest of the week.
- The focus this week will be on the ECB monetary policy meeting (Wednesday) and ECB accounts meeting on Thursday. All eyes will be on prospects of the PEPP and any signs of tapering (the scaling down of the PEPP).
AUD
- The Aussie dollar strengthened about 1.7% against the greenback last week and has continued its rally into the new week currently trading at 1.272 USD/AUD.
- The NAB Business Confidence index figures for April were released this morning and reached a record high of 26 with confidence improved in all industries.
- Retail sales figures for March were also released this morning and resulted in an increase of 1.3% month-over-month.
- With not too much data set to be released this week, market sentiment is likely to take cues from the prevailing trend.
NZD
- NZD pairs held up fairly well in the markets last week. After enduring headwinds in the mid-week trade, the Kiwi Dollar was able to hang onto previous gains against developed-market currencies. The GBP/NZD pair closed the week down by 0.43%, at 1.920 against the pound.
- New Zealand’s Balance of Trade for March was released last week. While the country’s Trade surplus was forecasted to rise past NZD $200m, the surplus narrowed to $33m, from $181m in February. While exports fell by 2.3% in March, Imports rose by 11%.
- Last week, the NZ Unemployment rate for Q1 was released, and fell to 4.7% after last quarters’ 4.9% reading. While unemployment remains above pre-pandemic levels, the labor market has made a partial recovery from the highs of 5.3% unemployment.
- The ANZ Business Outlook Index for New Zealand jumped by 9 points in May, rising to 7 from a reading of -2 in April and -4.1 in March.
ZAR
- The Rand has made a strong push this last week off the back of some positive data around the countries Trade Surplus which in turn increased exports by 28.9% MoM.
- The rate is currently trading at 19.76 to the Pound. The rate is showing signs of turning as it was trading around 19.55 on Friday last week.
- This upcoming week will have many technical and fundamental data released as inflation based statistics are expected to rise.
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