What’s been happening?

Pound Sterling – UK Markets 

The British pound extended its rebound on Friday and snapped a 14-week losing streak against the euro and a four-week losing streak versus the dollar. The upbeat employment and retail sales data from the UK earlier in the week helped the currency outperform its rivals and the lack of major Brexit supported its action.

Over the weekend, citing a leaked government document titled ‘Operation Yellowhammer,’ the Sunday Times reported that the UK was predicting a hard Irish border and shortages of food, medicine and fuel in the event of a no-deal Brexit. However, Michael Gove, a conservative politician and the Cabinet Office Minister who is in charge of no-deal Brexit planning, on Sunday told reporters that some concerns about a no-deal Brexit had been exaggerated. "It is the case, as everyone knows, that if we do have a no-deal exit there will inevitably be some disruption, some bumps in the road. That's why we want a deal," Gove said.    

US Dollar – US Markets

The greenback gathered strength against its rivals except for the British pound on Friday and the US Dollar Index, which tracks the dollar’s value against a basket of six major currencies, closed the week with a gain of nearly 1%. 

The data published by the US Census Bureau and the US Department of Housing and Urban Development on Friday revealed that housing starts in July declined by 4% and came in worse than the market expectation. On a positive note, building permits in the same period rose by 8.4%.

In the meantime, the University of Michigan in its Consumer Sentiment Survey announced that consumer confidence deteriorated in August with the headline index dropping to 92.1 and falling short of analysts’ estimate of 97.2. "Consumer sentiment declined in early August to its lowest level since the start of the year. The early August losses spanned all Index components," said Surveys of Consumers chief economist, Richard Curtin. "Although the Expectations Index recorded more than twice the decline in August as the Current Conditions Index (-8.2 versus -3.3), the Current Conditions Index fell to its lowest level since late 2016. Monetary and trade policies have heightened consumer uncertainty—but not pessimism—about their future financial prospects. "

Over the weekend, White House economic adviser Kudlow argued that there was no recession in sight during an interview with Fox News. "Consumers are working. Their wages are rising. They are spending and they are saving."

Euro – European Markets

The only data from the EU on Friday that the euro area trade surplus narrowed to €20.6 billion in June and came in better than the market expectation for a surplus of €16.3 billion but couldn’t help the euro, which posted losses against both the dollar and the pound sterling, find demand. 

Later in the day, German magazine Der Spiegel reported that the German government was standing ready to dismiss its balanced budget and take on new debt if needed to battle a possible recession. Although this report was not confirmed by the Finance Ministry, it revived hopes of more stimulus and allowed the shared currency to limit its losses ahead of the weekend.

What’s coming up? 

UK: There won’t be any macroeconomic data releases from the UK on Monday. 

US: There won’t be any macroeconomic data releases from the US and markets will focus on the bond markets and any fresh headlines surrounding the US-China trade conflict.

EU: The Eurostat will release the inflation report, which is expected to show the core Consumer Price Index staying unchanged at 0.9% on a yearly basis in July. The European Central Bank will publish the current account figures as well.