Weekly currency news: Syria fears weigh on market sentiment
The major currency crosses moved directionless last week, with market sentiment subdued on concerns about the escalating tensions in Syria and the consequences for global trade of the U.S. – China war on tariffs.
The upbeat tone of the Federal Reserve’s monetary policy minutes was not enough to lift the dollar, which traded lower last week, especially against the euro and the pound, and has opened this week in the same fashion.
This week we will have some interesting indicators, namely the UK, eurozone and Japanese CPI readings, the U.S. retail sales and the BoC interest rate decision, which might have a relevant impact on currency markets.
Currencies last week
- EUR/USD: sideways movement around 1.2300
- GBP/USD eyes 21-month highs at 1.4345
- EUR/GBP dives to 11-month lows below 0.8700
- USD/JPY: fresh 7-week highs at 107.50
Main events this week:
The U.S. calendar, opens on Monday with the March retail sales data. Consumption is expected to have picked up after three consecutive months of contraction which have casted doubt about the performance of the Q1 GDP. Another downbeat reading in March might have negative consequences on the dollar.
On Tuesday, we will be attentive to the U.S. building permits and housing starts. Construction activity eased in February although it remains at its highest levels in decades. Another decline in March might increase selling pressure on the dollar.
In the Eurozone, the most relevant indicator this week will be the Consumer Prices Index figures from March, due on Wednesday. Inflation is expected to have remained steady while the core CPI is seen dropping further away from the ECB’s 2.0% rate. If these figures confirm, the impact on the euro from this event is likely to be negative.
The UK calendar opens on Tuesday with the ILO unemployment Index, which is expected to show a further decline in the three months to February. The tighter labour market should reflect in the increase of average earnings to have a positive impact on the pound.
On Wednesday, the UK Consumer Prices Index data is expected to show that inflation continues easing from last year’s peak. The risk of this event would be in a lower than expected inflation, which would ease pressure on the BoE to normalize interest rates and might have a negative impact on the pound.
In the Japanese calendar, on Thursday, the focus will be on the National Consumer Prices Index. Overall Inflation is expected to have accelerated further in March, although the more reliable core CPI might have contracted, which is likely to dampen the positive impact on the yen.
On Wednesday, the Bank of Canada monetary policy decision might have some impact on Canadian dollar crosses. The BoC is widely expected to leave rates unchanged at 1.25% although the market is increasingly pricing in a rate hike in May and the bank might start anticipating it on the ensuing press release. Any hint in that line might boost CAD volatility.