Brexit deal and Eurozone quantitative easing in focus

 

Pound - GBP 

Attention turns to Parliament approval

On Thursday last week, the Pound to Euro (GBP/EUR) exchange rate managed to firm by almost a cent, while the Pound to US Dollar (GBP/USD) exchange rate jumped by nearly a cent and a half, before losing some ground. The upward momentum for Sterling came when reports hit that both negotiating sides had reached an agreement in principle. Brexit has been the main driver for Sterling in recent months, and at the weekend EU leaders approved Theresa May’s withdrawal agreement stating that it is the ‘best and only deal possible.’ However, the hard work for Theresa May starts now as she attempts to get it approved by the UK Parliament—the vote will take place on December 12th, and there’s already speculation that many will rebuff the deal. There’ll be another Commons debate and Cabinet meeting taking place today. Bank of England (BoE) Governor Mark Carney will also speak today; the central bank’s latest stress test results will be revealed on Wednesday. 

Euro - EUR

Quantitative easing in focus

Last week saw some disappointing Eurozone economic data reach markets, which raised further questions as to whether the European Central Bank (ECB) will be able to easily end its quantitative easing programme this month as it’s been promising. ECB Chief Mario Draghi will speak today, and if there are any hints that the Bank may continue with its extraordinary stimulus programme, the Euro could be pressured lower as interest rate increases would be pushed further into the future. Investors will also be watching the key inflation reading due out on Friday, which could play into the ECB’s decisions on monetary policy. 

US Dollar - USD 

Is the US slowing down? 

There have been some concerns that the US economy could be losing steam. These rumours were given some support on Friday when manufacturing and services data showed productivity had eased. One of the main events which could impact markets this week will be the Group of 20 (G20) leaders’ summit beginning on Friday. Trade will be one of the hot topics of discussion and eyes will be on US President Donald Trump as markets look for hints about recent trade disputes with China. In terms of economic data, Tuesday will bring with it Consumer Confidence figures, while Wednesday will highlight Gross Domestic Product (GDP) growth numbers and trade balance readings. Federal Reserve Chief Jerome Powell will also speak on Wednesday, while the central bank’s most recent meeting minutes will be out on Thursday. Markets are looking for any signs as to whether an interest rate hike in December could still be on the cards, with most economists predicting it a high possibility.

Australian Dollar - AUD 

Interest rate rises in Australia's future 

Last week, Reserve Bank of Australia (RBA) Chief Philip Lowe reiterated that steady monetary policy was needed for the near future, but that an increase in interest rates would occur should the economy grow as forecast. The central bank is watching house price corrections, the labour market and wage growth, and credit supply. There’s little by way of influential Australian economic data this week, but markets will pay attention to Thursday’s Private Capital Expenditure and Friday’s Private Sector Credit numbers. 

New Zealand Dollar - NZD

Retail Sales flop

New Zealand’s services sector took an upswing in productivity in October according to data last week. However, milk prices at the latest dairy auction softened. Dairy is New Zealand’s biggest commodity, and some forecasters expect prices to continue falling as supply is ramped up to record levels. Overnight, Retail Sales came in flat in the third quarter at 0.0%. The reading lies far below the forecast 1.0% and the previous 1.1% print. A few economic events are happening this week, including the latest trade balance data, and the Reserve Bank of New Zealand’s (RBNZ) most recent financial stability report.

Canadian Dollar - CAD

BoC given breathing space

Figures last week showed Canadian inflation accelerated in October hitting 2.4% on the year, but the core measure remained around the Bank of Canada’s target at 2.0%. The reading gives the Bank of Canada (BoC) the freedom to proceed with caution when it comes to monetary policy after inflation hit a seven-year high of 3.0% in July on the back of surging gasoline prices. It’s a quiet start to the week for Canadian domestic data, but Friday will heat up with Gross Domestic Product readings due for release. The ecostats are expected to show a decline in growth, which may create some downward pressure on the CAD exchange rate.