There was a quiet start to the week with a bank holiday Monday for all major economies and currencies, apart from the US and Australia. The markets had to wait until Wednesday before any sight of significant data. This came in the form of Australian inflation figures, which were a disappointment and temporarily crushed the currency, which had been priced in expectation of an interest hike in the foreseeable future. The Aussie dollar consequently lost ground and at the end of Thursday’s trading had dropped to its weakest level in April so far. Another currency that lost out this week was the Turkish lira due to poor inflation data, leaving the currency to trade at 3-week lows against the pound. Manufacturing Purchasing Managers’ Index data from China published mid-week added additional fuel to the fire with regards to global discussions on a slowdown in China. The data came in worse than expected at 48.3 – a reading below 50 signifies a contraction.
Today we are expecting inflation data from Japan; consensus is that there will be a slight improvement in national core inflation and a more significant improvement for Tokyo core inflation. The Ukraine crisis will be an issue worth keeping an eye out for over the weekend, particularly as we have seen an escalation in tensions and stronger rhetoric throughout the week. The markets remain cautious but patient; any serious escalation in the situation will have an effect on global risk appetite, as well as on currency markets.
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