BoE optimistic on recovery
Monetary Policy Committee optimism
Last week, the Bank of England's monetary policy meeting was one of the main focal points. While monetary policy remained unchanged, the surprising thing about the announcement was the level of optimism regarding economic growth shared by the Monetary Policy Committee members. To tie in with the more positive outlook, there was mention of potentially ending the central bank's asset purchase programme later this year, as growth forecasts suggest a return to pre-Covid levels by the end of this year. In the week ahead, Bank of England Governor Andrew Bailey is due to speak on Wednesday which could give the Pound further opportunity to move. Additionally, preliminary growth, industrial, and manufacturing stats will be out by the end of the week.
European Central Bank President Christine Lagarde has suggested that the Eurozone recovery from the recent Covid-induced recession may have been slow, but that the middle of the year should start to show signs of progress. Unfortunately, the ECB doesn't see a return to pre-Covid levels until the middle of 2022. While the UK and US have been vaccinating quickly, the Eurozone is falling behind in comparison, which has caused some Euro weakness. There's also some concern that the ECB could cut interest rates again. In the week ahead, German inflation stats will be out, as well as the EU economic forecasts for the next two years.
A potential slowdown
US labour market data disappointed last week, signalling a potential slowdown in the US economic recovery, which caused the Dollar to dip sharply against other currency majors. However, vaccinations being rolled out across the country and a fall in coronavirus cases will mean that the economic outlook could brighten in the coming months. In the week ahead, inflation data will be released, while Federal Reserve Chairman Jerome Powell will also be speaking.
AUD and NZD
A fall in unemployment
Last week, the Aussie Dollar slipped after the Reserve Bank of Australia announced it would be extending its bond purchases. The central bank said it would be keeping monetary policy at accommodative levels until there were notable inflation increases and wage gains. The RBA also kept interest rates on hold at 0.10% in line with economist expectations, despite recent positive ecostats regarding employment and inflation. Just moments before the monetary policy announcement, the Australian Dollar had climbed against the US Dollar by around 0.50%, but faltered after the information reached markets.
Meanwhile, the New Zealand Dollar climbed after a better-than-forecast jobs report was published and boosted sentiment in the Kiwi currency. Unemployment levels dropped to 4.9% from 5.3%, after Employment Change rose by 0.6% in Q4 on the quarter. In the week ahead, Australian Consumer Confidence numbers will be released, as well as New Zealand Retail Card Spending, business activity, and services numbers.
Soft jobs report
Last week, the Canadian Dollar managed to hold its ground after a weaker-than-forecast jobs report reached markets. The fall in employment was attributed to weaker retail sectors, predominantly in Ontario and Quebec as Canada experiences strict lockdown measures. The Canadian Dollar hit six-month lows against the Pound at the end of January, while reaching its highest level against the US Dollar since April 2018 just sessions before. Bank of Canada speeches this week could influence the CAD exchange rate, in what's forecast to be a quiet data week.