GBP

Sterling was lower last week as a series of disappointing economic reports weighed on the pound. GBP/USD was down around a cent for the week, as an unexpected dip in UK house prices shook confidence in Britain’s economic recovery just as a key service sector PMI missed its mark. EUR/GBP hit its highest since late March before the pound recouped some ground to end the week broadly flat versus the single currency. Sterling was sharply lower against commodity currencies, with the pound trading at its weakest against the Australian dollar since November. GBP/CAD lost around two cents to hit a 2014 trough, while GBP/NZD lost over a cent to hit its lowest level since last July. Looking ahead, manufacturing production data out on Tuesday will be a vital indicator of the UK’s economic recovery, while Thursday sees the Bank of England deliver its monthly policy announcement, although no major upsets are likely.

EUR

The euro came under pressure last week as the European Central Bank (ECB) dangled the prospect of quantitative easing being used to combat deflation in front of the markets. While the bank left its benchmark rate on hold at 0.25 per cent, ECB president Mario Draghi gave his strongest indication to date that the bank is willing to pursue “unconventional” policy measures to spur demand. EUR/USD dipped to five-week lows, while EUR/JPY was flat after rising in the middle of the week. EUR/CHF was up sharply, breaking the 1.22 barrier to reach its strongest since early February. Data this week is sparse, but investors will continue to tread carefully as the ECB cautiously sets out its looser policy course in the coming days and weeks.

USD

The US dollar was mixed last week, rising against some of its major peers while losing ground to commodity currencies. USD/JPY touched on 104 but ended the week broadly unchanged. The dollar was up versus the euro, however, punching out a five-week high. Key US non-farm payrolls figures on Friday received a lukewarm response, despite being largely positive. USD/CAD dropped to one-month lows as the data was not seen as strongly supportive of the Fed’s taper. An up and down week for the AUD/USD pair ended on a high as the Aussie reacted positively to the US employment figures, which was the biggest foreign exchange event of the week. This week, all eyes will be on the release of the minutes from the Fed’s latest policy meeting, as investors seek clues as to the central bank’s position on raising rates.

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