tocks rose worldwide, yet US yields retreated slightly. The combination of lower US yields and increased risk appetite fueled a rally by every major currency against the US Dollar. The best performing currency, by far, was the Mexican Peso, up over 6% as markets put in a ‘sell the rumour, buy the news’ reaction to the sweeping electoral victory of the Mexican left-wing party in last Sunday’s election.

All eyes are on the June inflation report out of the US on Thursday. The lower than expected wage increase from the June payroll report means that the chances of a ‘miss vs. meet’ expectations have probably increased. The release of the minutes from the last ECB Council meeting, also on Thursday, will be the other pivotal event of the week.

Major currencies in detail

GBP

Positive news from the PMI surveys of business activity and an upbeat message from Carney were both overlooked by the markets, which continue to focus on the lack of progress in Brexit talks. The resignation of British Brexit secretary, David Davis, was initially perceived as a disadvantage for the Pound, adding uncertainty to the negotiations, however, market sentiment has since recovered, seeing the departure as strengthening May’s position. Sterling moved almost tick by tick with the Euro against the US Dollar, managing a gain of almost 1% for the week.

This week will be a busy one for Sterling. Industrial production and manufacturing out on Tuesday could support the Pound if they confirm the strong streak in UK economic data.

EUR

A slow week in the Eurozone still saw significant positive surprises in German factory orders and industrial production. The data points provide further confirmation that the slowdown in Eurozone activity before the summer was a blip, rather than a change in trend. ECB minutes, out Thursday, will shed some clarity on the Council expected timeline for hikes. Markets expect a first hike in September 2019, however, we are beginning to think it may come earlier.

USD

The payroll report for June was mixed. The headline job creation number was stronger-than-expected at 213,000 versus 195,000 consensus. It’s worth adding that May’s reading was also revised upwards. Unemployment, however, posted a surprise increase, rising from 3.8% in May to 4.0% in June – but this was mainly driven by the reentry of hopeful workers into the workforce, looking for a position. Wage growth decelerated from 0.3% to 0.2% on a monthly basis, but rose by 2.7% YoY, which is now slightly below inflation for the first time in many years. After this miss, another disappointment in June inflation in CPI data, which will be released on Thursday, could lead markets to revise their view of future Fed hikes and add fuel to the recent Dollar selloff.