Brexit, coronavirus, and election in focus
Brexit talks intensify
On Friday, the Pound climbed against the US Dollar and has traded broadly sideways this morning following a conversation over the weekend between Boris Johnson and EU Commission President Ursula von der Leyen. It was agreed negotiations should be intensified, meaning the British Pound could have an interesting week ahead with EU and UK negotiators attempting to hammer out a deal as soon as possible. As the EU has stated that a deal needs to be reached by the end of October or early November for it to be ratified before the transition period runs out at the end of the year, the Pound could be very sensitive to headlines and developments in the coming month. This week the Bank of England's Financial Policy Committee will release its latest statement, while highly influential growth data will also be revealed.
Hindering growth and inflation
Last week, Reuters reported that the European Commission had said a continued increase in EUR strength could damage the Eurozone's economic rebound as well as hindering any climb in inflation. The Euro has appreciated in nominal terms around 7.5% between February and August this year and could reduce growth levels if it persists. The report said: 'A further substantial strengthening of the Euro would carry significant downside risks to Euro Area growth and inflation in a context of a fragile recovery.' In the week ahead, European Central Bank President Christine Lagarde will be speaking on multiple occasions which could have the potential to move the Euro. Additionally, the European Central Bank will release its monetary policy meeting accounts at the end of the week, which could create EUR exchange rate movement.
Safe-haven demand as Trump gets coronavirus
The US Dollar rose on Friday as investors headed for safe-havens after US President Donald Trump tested positive for the coronavirus, just a month away from the election. The release of labour market data had little impact on markets as the focus stayed on Trump's health. One of the political events to watch this week will be the Vice Presidential debate between Mike Pence and Kamala Harris. With election day rapidly approaching, markets are very focused on politics, and key economic data ahead of the vote. The Federal Reserve will release it's meeting minutes this week, and a number of central bank officials will also speak throughout the week which could influence the Dollar.
AUD and NZD
Susceptible to weakness
The Australian Dollar softened a little at the end of the week against the US Dollar but still managed to retain gains for the week as a whole. The uncertainty of the US election and the health of Donald Trump has left some currencies such as the Australian and New Zealand Dollars susceptible to weakness as investors head towards safe-haven assets.
In the week ahead, the Reserve Bank of Australia will make its latest interest rate decision, with rates expected to remain on hold at 0.25%. Additionally, Australian trade balance and home loans figures will also be released. Meanwhile, it's a quiet week ahead in New Zealand in terms of economic data, with only a dairy price index released. Both currencies are likely to be susceptible to geopolitical developments.
Risk appetite and oil prices
The Canadian Dollar softened on Friday on the political uncertainty that swept the market and pressured oil prices lower. Last week a lot of CAD strength was influenced by risk appetite and USD movement. This week there are several high-tier pieces of data due for release, such as trade balance and labour market stats. Additionally, Bank of Canada Governor Tiff Macklem will be speaking, which could also impact the way the CAD exchange rate trades.