Last week, the Pound climbed on positive Brexit sentiment, when Jean Claude Juncker said that he was ready to get rid of the backstop in the withdrawal agreement. Meanwhile, the Bank of England kept interest rates on hold in line with market expectations, while suggesting downside Brexit risks could hinder inflation. This week, Boris Johnson heads to the United Nations General Assembly in New York, where he plans attempts to renegotiate Theresa May’s divorce deal alongside the event. The British PM has said he’s ‘cautiously optimistic’. Headlines over Brexit may create Sterling movement in the week ahead.
The Euro softened against the Pound last week and has weakened against both Sterling and the US Dollar this morning after weaker Eurozone data was revealed. Germany produced its worst manufacturing reading since 2009. Uncertainty around global trade wars and the car industry have damaged sentiment, contributing to the worst manufacturing reading since the Global Financial Crisis was in full swing 10 years ago. On Thursday, comments from European Central Bank Chief Mario Draghi could impact the way the Euro trades.
Last week, the Dollar softened after the Federal Reserve cut interest rates on Wednesday. However, by the end of the week, the Buck was firming as political tensions, and the global growth outlook weighed on the market and investors turned to assets with a safe-haven appeal. There are a few important pieces of data out in the week ahead, including consumer confidence on Tuesday and US growth numbers on Thursday, which could influence the US Dollar exchange rate.
Last week, the Australian Dollar hit a two-week low versus the US Dollar when the Australian unemployment rate came in slightly higher than expected. Markets saw the data as increasing the likelihood of another rate cut by the Reserve Bank of Australia. Both Trans-Tasman currencies have been under pressure from global trade tensions, and comments by the International Monetary Fund on Monday regarding risks to the domestic outlook for the New Zealand economy pressured the Kiwi Dollar to four-year lows. The IMF also said the Reserve Bank of New Zealand might have to venture into the territory of ‘unconventional monetary policy’. All eyes will be focused on Wednesday’s Reserve Bank of New Zealand interest rate decision. In Australia, a speech by Reserve Bank of Australia Governor Philip Lowe could also be under close scrutiny on Tuesday.
The Canadian Dollar softened against its US counterpart last week after economic data failed to impress. Retail Sales marked their first gain in the past three months, but markets had expected a more substantial 0.6% increase. It’s a quiet week for Canadian data, meaning oil price fluctuations and any geopolitical developments could be some of the leading influencers for the Loonie exchange rate. The recent attack on Saudi Arabia’s energy industry has been pushing the price of Canada’s largest commodity, oil, higher in recent weeks, offering the Canadian Dollar some support.