Another rate hike?

Downplaying hikes

The Pound's continuing to feel the heat versus the US Dollar, while issues with the Northern Ireland protocol saw the GBP/USD currency pair drop by approximately 0.40% on Friday. Varying levels of optimism surround the talks, with the potential for Article 16 to be triggered a possibility. Meanwhile, the Chief Economist at the Bank of England has played down the chance of an interest rate hike, and said he was looking for reasons to not vote in favour of a hike at the upcoming December meeting. This week, data detailing the health of the manufacturing and services sectors will be released, as well as sales stats from the Confederation of British Industry. Meanwhile, a number of BoE Monetary Policy Committee members and the BoE Governor are scheduled to speak in the coming sessions.

Restriction hindrance

The widespread Coronavirus cases throughout Europe have hindered Euro strength recently. The Euro to US Dollar currency pair dropped by 1.50% last week, while against the Pound, the single currency weakened by 1.60%. More restrictions across the Eurozone may be inevitable, with the currency bloc's largest economy, Germany, announcing a national emergency. Manufacturing and services stats will be out in the week ahead for both Germany and the Eurozone as a whole. Meanwhile, German sentiment data will also make its way onto the market. European Central Bank President Christine Lagarde will also speak later in the week.

Fed chair up for grabs

US Dollar strength continued throughout last week, with the Buck making gains against a number of other currency majors. One of the pressing questions at the moment is who will get the title of Federal Reserve Chairman as US President Joe Biden is due to make a decision. As well as current Chief Jerome Powell, Governor Lael Brainard could also be in the running, and she could bring a more dovish approach to monetary policy—a factor that could create slower rate hikes in future, which may keep a lid on US Dollar gains. In the week ahead, manufacturing and services stats will be out, as well as growth numbers for the third quarter and inflation for October. The Federal Open Market Committee's meeting minutes will also be released on Wednesday, and US markets will be closed for Thanksgiving on Thursday.

Another rate hike?

The Pound to Australian Dollar currency pair has been trading around 2.0% higher since the start of November as Coronavirus restrictions have hampered Australia. Strong inflation and employment data out of the UK have increased the likelihood of a rate hike by the Bank of England in December, while the Reserve Bank of Australia is unlikely to raise rates next year, according to Governor Phillip Lowe. This policy divergence is arguably the most significant contributor to the pairs’ recent move higher. Australian manufacturing and services stats will be out today.

The Kiwi has also suffered at the hands of Sterling strength, with the GBP/NZD currency pair trading 0.70% higher since the start of last week. The pair could experience some volatility this week with UK PMI’s due out tomorrow and the latest Reserve Bank of New Zealand interest rate decision due on Wednesday. Market consensus is pointing to another 25 basis-point hike, taking the headline rate to 0.75%. New Zealand Retail Sales data will also be out today, followed by trade balance stats later in the week.

GBP/CAD Downtrend

Sterling nudged higher against the Canadian Dollar last week, gaining 1.30% amid rising probability of a Bank of England rate hike next month. The pair has been on a downtrend, moving 5.0% lower from highs of $1.78 in February. Last week, Canadian inflation noted a rise in October, from 4.4% to 4.7% on the year, while registering a 0.7% rise on the month. It's a quiet week in terms of Canadian events, but Deputy Bank of Canada Governor Paul Beaudry will speak on Tuesday, and Average Weekly Earnings data will be out at the end of the week.