 The markets were driven by multiple themes last week. Dollar ended up broadly higher as supported by hawkish FOMC minutes and rebound in treasury yields. However, it's outshone by New Zealand and then Australian Dollar. Kiwi was boosted by stronger than expected CPI. Meanwhile, the Aussie was pulled up by iron ore prices, which countered the negative impact of falling Chinese stocks. Yen was the mixed despite risk aversion. On the other hand, Sterling was the weakest one as pressured by Brexit impasse, weaker than expected CPI and retail sales. In particular, UK Prime Minister Theresa May achieved nothing in the EU summit. The deadlock of Irish border backstop remains a deadlock. And EU leaders even avoided calling an unscheduled summit in November to close the deal. Canadian Dollar was the second weakest one as weighed down by falling oil price as well as sharp deceleration in headline CPI. While BoC is still expected to hike this week, the path beyond is now far less certain. Euro was originally very weak on Italian budget concerns. EU's warning letter to Italy should have formally started the clash. Nonetheless, the common currency was later saved as EU expressed the intention to de-dramatize the situation. Also, Moody's downgrade of Italy with stable outlook was well received. The common currency ended the week mixed and should have some room for recovery this week. But the situation is not solved unless Italy revises its budget, which will not happen. So, the recovery in Euro is likely only temporary. |
