The most remarkable aspect of FX trading continues to be the lack of any visible impact among G10 currencies of the sharp sell-offs in risk assets we are witnessing worldwide. Even emerging market currencies are holding on remarkably well given the stock market moves. Currencies continue to trade off idiosyncratic factors, ignoring risk aversion in other markets. The best example is the South Korean Won at the start of the last week, which rose sharply against every other major currencies on news of Kim Jong-Un’s surprise visit to China and what it portends about lower geopolitical risks in the Korean peninsula.

Major currencies in detail

EUR

Disappointing German CPI figures were probably the main factor weighing down the Euro last week. This introduces downside risk to the Eurozone-wide number out on Wednesday. The key core number, which excludes volatile food and energy components, is expected by the consensus to inch up to 1.1%. The German number, however, leads us to think that a repeat of the 1% level from February is more likely. Such an outcome would surely pressure the Euro towards the lower end of its recent range between 1.21 and 1.25 to the US Dollar.

GBP

In the absence of major economic news, Sterling spent the shortened holiday week mostly following the Euro against non-European currencies, and that saw Cable inch lower closer to the 1.40 level.

The main event for this week is the publication of the PMI surveys of business activity on Tuesday, Wednesday and Thursday. The consensus is not expecting big surprises here, and neither are we. Therefore, we’d expect the recent pattern where Sterling trades very closely to the Euro against other major currencies to continue for the time being.

USD

A generally stronger tone in US macroeconomic releases buoyed the Dollar last week against most of its G10 peers.

Business surveys out on Monday after the holidays confirmed this modest strengthening, with a particularly strong upward surprise in the prices paid component. Dollar trading for this week should be driven by two key events. First, the publication of the concrete list of Chinese products that will be assessed tariffs. Second, the monthly payrolls report for the month of March. We expect yet another strong month with over 200,000 net job creation, a drop in the unemployment rate to 4.0%, and, crucially, a modest acceleration of wage growth to 2.8% in annual terms.