The greenback was the weakest G10 FX performer on Friday and ended the week clinging to the bottom rung of the G10 currency ladder despite solid Producer Price Index increases. If there is one person who can bear the blame for the downfall of the dollar last week, it must be Federal Reserve Chair Jerome Powell. With his dovish bi-annual testimonies in the House of Representatives and the Senate on Wednesday and Thursday, he convinced even the most zealous sceptic that a July Fed rate cut is indeed going to happen. This morning Chinese Q2 Growth Domestic Product growth data came out conform expectations at 6.2%, lower than the 6.4% in Q1. This is yet another sign the trade war is starting to weigh on Chinese growth and may mean China will be further forced to compromise at the negotiation table and come to a deal with the US quickly to not have its economic prospects further deteriorate. This week brings us the always vital Retail Sales on Tuesday which may see a reversal after last month’s strong growth performance of +0.5% month-on-month. Several Fed speakers are scattered across the week as well, with hints about how dovish the Fed will be after the July rate cut being in the focus of markets.


Sterling lines itself up for a make or break week following a dismal batch of PMI readings at the beginning of the month. Output hasn’t been the story for the UK economy for some time though, as the British consumer consistently grabbed the bucket in an “all hands on deck” scenario with the Brexit storm hitting. If the UK consumer stops bailing out the flagging economy, things could go from bad to worse very quickly for the Bank of England and the new Prime Minister. Tomorrow’s labour market data is expected to hold firm with average weekly earnings standing strong at 3.1% while the figure excluding bonuses is expected to rise from 3.4% to 3.5% in May. The pace at which companies employ additional labour, as they pivot away from long term infrastructure investment to additional workers to raise output, will determine the confidence of firms within the economy. Inflation data is released on Wednesday but will be the quietest of the releases with the Bank of England stuck in a Brexit bind. The release that is the most likely to cause fireworks is June’s Retail Sales report on Thursday. The precursor, the BRC Sales Monitor, released last week suggested that retail sales will continue to decline in June, but not at a rate comparable to May’s. Transitory weather effects are the cause for the decline, but hints that the downturn is anything but transitory will likely cause a significant sell-off in the pound.


Industrial Production data gave the euro a leg up against USD on Friday, although the single currency remained under some light pressure from other major currencies. The unexpected 0.9% monthly increase in Industrial Production in May defies the downbeat tones in Purchasing Manager Indices earlier, which actually point in towards a 2% year on year decrease in this sector. Another disclaimer related to this data is that it doesn’t include construction data, which especially in Germany was a big drag on the national headline earlier last week. All in all, the June reading carries many risks to the downside, which means Eurozone Q2 economic growth data is still far from out of the woods. Meanwhile, the European Central Bank’s easing intentions seem to be pretty much set in stone, which suggests only another soaring surprise of IP data in June may be sufficient for the Governing Council members to scratch their scholarly heads and reconsider their monetary policy stances.


The loonie had a stormer last week, helped along by storm Barry off the south coast of the US, as oil prices climbed and the US dollar dropped on Powell’s testimonies. This week sees the Consumer Price Index released for June. CPI shot up in May to confirm the BoC’s neutral stance as the core measure averaged above the 2.0% target. Retail Sales are released on Friday and is expected to show a further firming of Canadian economic conditions.