Weekly FX wrap: First signs of unease from the ECB over the appreciating EUR, while key UK data leads to GBP tripping through 1.29

USD: The greenback began the week on the front foot amid the easing of political tensions between the US and NK, which led to the USD making a push through 94.00. However, this had been short-lived after the FOMC minutes where members had been cautious over the slowdown in inflation suggesting that it may not be transitory.

EUR: First signs of unease over the EUR appreciation which has risen 3.5% since June and is 2.5% away on a trade weight basis from the 2014 peak where Draghi at the time that the EUR was a factor weighing on inflation. The ECB minutes which stated that the council expressed concerns about the possible market overshooting regarding the currency, in turn, this saw EUR fall to a 1-month low against the greenback.  Elsewhere, with many looking to Draghi’s speech at the Jackson Hole Symposium, source reports took the shine off, stating that Draghi will not use the speech to communicate a change in stance with markets and will hold off till Autumn.

GBP: A week full of key data releases from the UK saw GBP fall through 1.29 for the first time since July 13th.  Inflation readings had been somewhat softer than expectations with the Y/Y missing analyst estimates at 2.6% vs. Exp. 2.7%. As such, this had tempered calls for a rate hike by the BoE in the near term. Also, the ONS released a firm jobs reports with wage data ticking up, although real earnings reside at -0.5% and to round of the key data releases was retail sales, which came ahead of consensus, however prior numbers had been revised lower.

CAD: Inflations numbers out of Canada were generally in line with expectations; the core measures were within the Bank of Canada’s range of forecasts, and the central bank has already made the case that headline CPI (printing 1.2%) is due to temporary factors. As such, this did little to shake the narrative that the BoC will continue with its hawkish trajectory. CAD consequently tripped through 1.26 and is eyeing support zones from 1.2530-50.

AUD firmer amid cross related buying AUD/NZD which broke back above 1.08, subsequently taking the spot towards 0.80. This had largely been down to the move higher seen in base metals with Zinc at 10yr highs, while aluminium rose to its highest level since 2014. Much of this has stemmed from reports that China is stepping up moves to shut illegal aluminium and steel plants this year. Importantly for AUD

18 Aug 2017 - 16:15- Important- Source: Newswires

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