One of the big events last week was the ECB announcement of a package of easing measures and a revision to growth this year down from 1.7% to 1.1%.

Even with these easing policies, the ECB acknowledged that risks are skewed to the downside.

We also saw the German 10 year BUND drop significantly to its lowest level since 2016, so, all in all, we should continue to keep a bearish view of the Euro.

Of course, on top of that they are the other side of the Brexit discussions which is also dragging the Euro lower.

This week we also have a series of votes in the House of Commons over Brexit, with the first vote being on 12th March.

This first vote is on whether Parliament accepts the revised deal that the PM has been negotiating since her previous defeat in January. The likelihood is that this deal will be rejected, and if so, a vote will be held the following day to decide whether the UK should leave the EU with no deal, which is also likely to be rejected.

Assuming both of those happen we have yet another vote, on the following day, seeking an extension to article 50, which is almost certainly going to pass.

The US employment figures were interesting, with the standout release being NFP at just 20,000 additional jobs in February. While this may appear very negative for the US it is not unusual to have these odd slowdowns in a given month, the likelihood is that it is a temporary glitch. A number of analysts are claiming that the data is skewed following delays to previous releases due to the US government shutdown, so I anticipate this release having little impact on the US as long as it bounces back strongly next month. More encouraging were the figures for the unemployment rate falling to 3.8% and average hourly earnings creeping higher up to 0.4% for the month, 3.4% for the year.

In what was a busy week last week the Bank of Canada kept interest rates on hold with a somewhat dovish accompanying statement signalling that they are likely to keep interest rates on hold for longer. The Bank of Canada statement is more in line with that of the US now in terms of a “wait-and-see” approach and made specific reference to continuing growth slowdown. With very little else to cling onto, we should continue to watch oil for signs of direction. For anybody who is in any doubt about the correlation between the Canadian dollar and oil I thought I’d share the below chart:

Finally, we come to the Aussie, with the RBA keeping interest rates on hold, when some were rooting a possible cut. We also saw GDP disappoint coming in at just 0.2% last week from an expected 0.5%, with retail sales also struggling. With ongoing slowdowns in China, we need to consider the Aussie from a bearish perspective, particularly as it is likely that we are not too far away from an interest rate cut if we don’t see some better economic releases out of Australia.

Hard to believe but the GBP actually had a good week this week, predominantly down to the reducing likelihood of a no deal Brexit. Prime Minister Theresa May made it quite clear last week that Parliament would be given a vote on whether to extend article 50 or “crash” out with no deal. Clearly, the majority of Parliament want some kind of deal which means that a no deal scenario has almost been taken off of the table. Interestingly the EU chief negotiator Barnier reportedly said on Friday that he is prepared to look at changes to the withdrawal agreement particularly around the Irish backstop, so we could see further upside to the GBP this week. The EU is renowned for taking things to the wire and personally I think this will be no different, they did it with Italy only last year. Expect more positive rumblings out of the EU over the coming week.

What can we expect this week?

In terms of news events it is quieter than last week thankfully, although there are a couple of key events on the calendar:

  • Monday we have US retail sales
  • Tuesday we have GBP GDP and US inflation figures. Remember this is also the first day of the Brexit votes
  • Wednesday we have the budget in the UK, plus more Brexit along with Durable Goods orders for the US
  • Finally on Friday we have the monetary policy statement from Japan which is likely to maintain its dovish stance

We can see from the USD index that we are at a critical point, we have a triangle with price pushing against a key area of resistance. If this breaks we can expect to see dollar strength, particularly against some of the currencies mentioned above.

We can see looking at our risk indicators that we remain broadly stable. We have seen a drop in the Aussie against the yen but that was for economic reasons rather than risk, also we have seen the 10 year US yield drop on Friday again most likely due to the NFP release.

We need to be mindful that risk is never that far away, we continue to have risks around Trump and how long he can stay in office, China and trade wars with Europe and the US as well as additional black swans such as North Korea potentially rebuilding its nuclear testing capabilities. All of these must be watched.

Equities were also a bit softer last week, particularly towards the end. With rumours suggesting that there is still some work to do on the Chinese/US trade deal and general concerns around global growth with China reducing its growth estimate from 6.5% down to as low as 6% we just need to be careful.

What should we look at this week?

We certainly know what not to trade, my advice would be to avoid any GBP pair this week with everything that is happening.


This week the pair broke out of its channel and with my fundamentals hat on the Aussie should generally be weaker than the yen, particularly considering Japanese stocks are falling. I’m looking for a pullback around 79.00 or around 79.50 which is a pullback to the broken trendline and the 50% Fibonacci.


The New Zealand Dollar pulled back to a bunch of EMA’s on Friday on the back of the NFP release. As my fundamental outlook is still bullish US dollar, the NFP being nothing more than a quirk, I’m looking to short this pair on market open.


This pay interests me but I’m torn, my head says leave but my heart says trade. So I’m going to watch how this reacts over the next day or so, but with continued euro weakness I’d love to see a pullback around the 1.130 level for a short. Many analysts are predicting that this parable hit 1.10 over the coming months.

That’s all, for now, folks, happy trading.

Andi Thornton