Good Morning

Currencies continued to trade in the familiar tight ranges for most of last week as the markets awaited the US Consumer Price Index (CPI) for May, which, when published, reported the highest core inflation figure for 30 years. Investors remain concerned with the inflationary pressures that appear to be growing as the developed world recovers from the pandemic and how quickly central banks will stifle uptick by tightening policy. Initially, the dollar rallied before falling back and then rallying again into the close on Friday as the US Bond market belatedly reacted to the CPI data and yields increased. The pound was buffeted by these outside influences and has opened this morning a little easier than last week at $1.4100.

Another potentially busy week lies ahead with key data from the UK and the monthly Federal Reserve Open Market Committee (FOMC) meeting. After last week’s surprisingly high inflation report from the US, pressure has increased on the Federal Reserve to tighten policy. The markets will hang onto every word Jerome Powell says at the press conference following the meeting for any hints to a change in policy. There is an avalanche of reports from the Office for National Statistics (ONS) over the next few days for the pound to digest in the UK. In the background, as so often, there is an ongoing Brexit dispute with the EU rumbling on. The so-called “sausage wars “seem likely to continue into this week as the tricky issues of the Northern Ireland Protocol remained unresolved. Hopefully, the Euro 2020 tournament will be less contentious!

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The pound had a relatively quiet week last week but may become more vulnerable this week as the final easing of restrictions on the 21st June looks likely to be delayed and tensions between the EU and the UK show little sign of easing. However, as has often been seen, the EU likes to take negotiations to the last minute. So far, the impact of the dispute over the Northern Ireland Protocol has been muted, with sterling virtually unchanged against the euro in the last week at €1.1650. We have a data-packed week in front of us starting tomorrow morning when the ONS will release Average Earnings and hopefully Employment figures that are continuing to improve. On Wednesday, it’s the UK’s turn for CPI, which is likely to show a rise towards the 2% level whilst not rising as quickly as the US. The week closes out with May’s Retail Sales which several analysts expect to disappoint after April’s sharp rise. We will be listening to Bank of England Governor Andrew Bailey when he speaks tomorrow afternoon for any comments on the morning’s unemployment data.


As expected, at their monthly meeting last week, the European Central Bank played down any chances of tightening policy soon. Whilst not unexpected, the market turned against the euro, and some quite heavy selling occurred, which pushed the single currency to below $1.2100 against the dollar. It remained against sterling, but both currencies remain vulnerable to any breakdown in the ongoing talks over the trade issues surrounding Northern Ireland. An extremely quiet week appears to lay ahead with mainly second-string data on the docket apart from Eurozone Industrial Production this morning, German CPI tomorrow, and lastly, May’s CPI for the Eurozone on Thursday.


The highlight of the week for financial markets, generally not least the currency markets, will be Wednesday’s FOMC meeting. However, with the markets entering summer mode and volatility decreasing, it is unlikely that the Fed will want to rock the boat by discussing tapering; indeed, it is most likely that Jerome Powell will do all he can to avoid the subject at the press conference. Only two reports stand out on the data docket: May’s Retail Sales and Industrial Production, both of which are released tomorrow. The retail sales data may unsettle the markets as they are likely to be distorted by disruptions to the car market caused by the shortage of semiconductors. Away from financial data, President Biden will continue his travels this side of the Atlantic with what should be interesting meetings with President Putin from Russia and his Turkish counterpart President Erdogan.Scandi


Even though macro-data came in worse than expected last week, the Swedish krona kept on strengthening confirming what many analysts had written earlier about its seasonal performance. We are now in official krona strong ground that usually lasts until Midsummer and sometimes until the last Riksbank meeting in July which is the last one until the long summer holiday ending in mid-August. This week sees no major data releases which means technical and seasonal traders may outnumber day traders looking for quick profits.

The macro data from Norway also provided some sombre readings last week, in particular the latest CPI figure which was much lower than expected. It prompted the financial press to seriously question whether a rate hike from Norges Bank Governor Olsen will come in September, some going as far as saying that the Norwegian krone now has become a two-way bet. Volatility against most G10 crosses is expected to remain high throughout the week until the Deposit Rate announcement on Thursday. The market expects Governor Olsen to stay put but will closely listen to what he has to say regarding last week’s low inflation figures during the press conference.

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After a week of anticipation, the non-farm payroll report came in at a slightly disappointing level and encouraged sellers of the dollar to reappear. With employment rising at a lower than expected 559,000, the pace of the recovery in the US and the subsequent tightening of economic policy is starting to be questioned by investors. However, on closer analysis, the problem is not a lack of jobs but a reluctance to return to the workforce. This hesitancy by workers is leading to a squeeze on wages, although there are nearly 8 million fewer people employed than at the start of the pandemic. This combination of factors presents the Federal Reserve and the currency markets with a problem. The market perceives that the Federal Reserve should be starting to tighten policy to control inflation but is boxed in until employment drops.

Looking ahead into this week, events are likely to be dominated by worries over a possible surge in Covid cases in the UK caused by new variants, inflation concerns, and the monthly meeting of the European Central Bank on Thursday. With new variants occurring and cases increasing, there have been doubts cast over the further lifting of restrictions on June 21st. Still, with most of the country’s businesses open, the damage caused by delay is more likely to be psychological and damage confidence. However, with travel restrictions increasing and the chances of a vacation abroad receding, the euro may become increasingly vulnerable as the southern European countries miss out for a second summer in a row on the UK holidaymaker boosting the local economies. The G7 summit meeting also takes place this week at Carbis Bay in Cornwall to discuss the world’s economic fightback


The pound flew the flag for the G10 currencies last week against the strengthening dollar and has opened this morning at $1.4140 whilst staying relatively strong against the euro at €1.1620. However, with the government’s Matt Hancock saying yesterday that they were “absolutely open” to delaying the next stage on the roadmap to normality and concerns over the efficiency of the vaccines, worries will start to mount about whether consumer confidence has returned too early. If these fears grow, sterling could well begin to drift lower as the concerns of a stagnant economy and rising inflation come to the fore. this week Andy Haldane is slated to speak, who is always thought-provoking and maybe more so than usual as he is soon to be free from the current constraints of his current role as Chief Economist of the Bank of England. On Friday, we will be studying how the economy is performing when both Industrial and Manufacturing data are released, along with a snapshot of April’s Gross Domestic Product.

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The euro slipped against both the dollar and the pound last week and has opened at just above $1.2150 this morning for what is sure to be a busy week for the single currency. As with the UK, concerns are growing over the spread of the Delta variant across the continent and the impact that the travel restrictions that the UK has imposed on holiday destinations will have on the economy. We have a plethora of data to digest head of the monthly ECB meeting on Thursday starting tomorrow with the ZEW* Economic Sentiment indicators, German Industrial Production and Employment, Eurozone Employment, and its GDP. Wednesday is a quiet day with only regional data to digest, and on Thursday, the ECB meets.

* Zentrum für Europäische Wirtschaftsforschung – Centre for European Economic Research


The non-farm data was slightly weaker than expected on Friday, and immediate thoughts of tapering and tightening were returned to the back burner and with them the recent dollar strength. As a result, some analysts think that the greenback may now ease ahead of the next Federal Open Market Committee meeting on June 16th. However, it is unlikely to see too much movement before Thursday when alongside the regular weekly jobless claims numbers, May’s Consumer Price Index (CPI) is released. CPI is likely to show a rise towards 4.8%, its highest level since the early 1990s, and any substantial increase on that forecast rate will reignite the tapering debate. As usual, ahead of the monthly Federal Open Market Committee meeting, Fed officials are in speech blackout mode until after the next meeting on June 10th.


Sweden celebrated its National Day on Sunday and last week saw the krona strengthen against the G10 currencies. However, it has so far been a quite lacklustre six months period for the Nordic region’s largest currency which was tipped to be one of the best-performing currencies of this year at the outset. Instead, it has been stuck in quite a narrow range throughout most of 2021. This week will get the CPI figures on Thursday, which are expected to come in at 2% on a year-on-year basis and a positive change of 0.4% month-on-month.

In Norway, the week kicks off with the Industrial Production figures for April this morning, and the CPI and PPI figures are released on Thursday. Inflation is expected to be on the high side, at 2.9%, but that would be lower than in the past four months. If worries about inflation cool off, there is a chance that the market might start questioning whether Norges Bank Governor Olsen will increase interest rates come September as widely is anticipated. This kind of speculation is behind the recent Krone weakness we have experienced.

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Lanjaron Property currency update



Last week was primarily dominated by the debate over when the Federal Reserve will taper its asset purchases, in other words, tighten their monetary policy. Publicly the Fed, in particular Jerome Powell, has been repeating its commitment to its dual mandate of full employment and low inflation through an ultra-loose policy. After months of the same mantra, a sentence in the minutes of the last FOMC meeting, released Wednesday, was pounced on by the markets. The seemingly innocuous remarks made by “various participants” that at “some point in upcoming meetings”, the pace of asset purchase may need to be adjusted were enough to make equity markets fall, yields to rise, and the dollar rally. Although the moves were relatively short-lived, the speed and sharpness of this reaction was a warning of the shakeout that the markets will encompass when tightening does occur.

There has been unprecedented volatility in cryptocurrencies, which continued into the weekend, with Bitcoin falling over 15% yesterday. Whilst this isn’t usually an asset class discussed in our reports as it is usually ignored by the established financial markets, the volatility is starting to worry stock markets. Investors fear that losses in the crypto markets will lead to liquidation in the equity markets, causing a flight to safe-haven currencies such as the dollar. If the slide in cryptocurrencies continues, we will be watching out for signs of contagion and any knock-on effect to currencies. The ongoing ‘will they, won’t they’ tapering discussion will continue to be the central narrative in the week ahead.  As the month draws to a close, book rebalancing will start to influence markets, and it looks to be a lively end of the week with a long weekend ahead on both sides of the Atlantic and the release of US Personal Consumption data.



Sterling spent most of last week gradually edging up against the dollar and has opened this morning at $1.4150, just above its important support level of $1.4145. If it manages to hold this level, technical traders are looking for it to advance towards its highest levels for several years of $1.4500. Sterling is still holding up well against the euro, opening at €1.1615. After last week’s surprisingly strong retail sales and better than expected unemployment report, we have an unusually quiet week ahead with no data scheduled to be released apart from the Public Sector Borrowing Requirement tomorrow.

With the economic recovery lagging behind both the US and the UK, the ECB has so far been keen to continue its ‘dovish’ policies. This was backed up by its President, Christine Lagarde, who said on Friday that due to the ongoing uncertainty that its accommodative stance would remain for months to come. With these remarks in mind, the euro is likely to ease against both the dollar and sterling. Today could be a quiet session for the euro with several European countries on holiday, including France and Germany, celebrating Whit Monday. Tomorrow Germany releases its Gross Domestic Product (GDP) for the First Quarter and also the Ifo Business climate reading for May. The Eurozone data calendar highlight next week will almost certainly be the May readings for consumer and business confidence. The only noteworthy speaker is ECB Chief Economist Phillip Lane, who is on an “ECB Listens” panel tomorrow.



In the week ahead, investors worldwide will continue to try and second guess when the Federal Reserve will start to tighten by tapering its asset purchases. With contrasting messages coming from employment and price data, the debate is likely to continue for some time, certainly until the next FOMC meeting in June, leading to choppy markets.  The data week starts tomorrow with Consumer confidence and New Homes Sales. Thursday is the busiest day on the data docket with further reports on the state of the housing market in the shape of Pending Home Sales alongside the weekly Jobless Claims and Durable Goods Orders. Also released on Thursday are revisions to the first-quarter GDP figures, and Treasury Secretary Janet Yellen is due to speak. Ahead of the long US weekend celebrating Memorial Day, one of the Fed’s favoured data sets, Personal Consumption, is released on Friday.

The Swedish krona saw some fast swings and movements last week, but they were all within a narrow range. This week is quite macro data-intense with the PPI figure out tomorrow, followed by the Unemployment rate on Wednesday. More Swedes are expected to have found jobs, but the level is still likely to show that 9% of the population is unemployed. On Thursday, we get the Consumer Confidence figure and the Economic Tendency Survey. Finally, Friday finishes the week off with the Trade Balance being reported as well as the GDP figure and then the latest Retail Sales.
Norway’s currency, the Norwegian krone, has weakened throughout May and lost a lot of ground against the euro last week. Weaker GDP figures than expected and lower inflation figures than anticipated have contributed to its current lacklustre performance. Nevertheless, it is now trading well above the important 10.0000 mark against the euro. This week we will watch the Unemployment Rate, released on Friday, which is expected to come in at 3.5%, an improvement of 0.5% from the previous month.

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