This week will also be light in terms of macroeconomic data. Political headlines from Turkey and trade disputes will be key factors in currency markets.

Major currencies in detail

GBP

Labour market and inflation data last week came out largely as expected, as wages crawled up slightly faster than inflation and unemployment, according to the ILO definition, ticked down to a business cycle low of 4.0%. Neither this nor the stronger than expected retail sales numbers had much impact on Sterling, however, which continues to tread water on fears of a hard Brexit. We think these concerns are currently overstated in the market and even modestly positive news from the negotiations could trigger a sharp relief rally in the currency.

EUR

The Euro managed to stabilise last week on little news, but market fears about European banks exposure to the Turkish crisis outweigh the improving tone in macroeconomic data over the past few weeks.

The European Central Bank minutes and the flash PMI indices of business activity, both out on Thursday, will concentrate investors´attention this week. We look for a rebound in the composite PMI to fuel a modest Euro rebound from current levels.

USD

The only economic data of note last week was a stronger-than-expected retail sales print, which leaves the three-, six- and twelve-month average all above the 0.5% level, signalling healthy consumer spending and confirming that a downturn in the US is nowhere in sight.

This week will likewise be light on the economic front, but the minutes from the last meeting of the Federal Reserve will be released Wednesday. We expect no change in either the positive outlook for the US economy nor the continued appropriateness of the current gradual approach to interest rate increases.