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Brexit, paused; global interest rates in focus

GBP – Brexit on hold as general election takes the stage

The Pound traded at around the 1.16 level against the Euro last week and in the region of 1.29 against the US Dollar. Brexit has almost paused, and a lot of focus at the moment is on the upcoming general election, which is seen as mostly positive to push Britain's exit forwards and eliminate the possibility of a no-deal Brexit. Today, UK construction data has printed above forecasts, and tomorrow will detail how the services sector is performing, with expectations for an increase. The Bank of England will announce its latest interest rate decision on Wednesday with markets expecting that the interest rate will remain at 0.75%. The announcement will be followed by a press conference with Bank of England Governor Mark Carney. 

EUR – Calling for support 

Last week, the now-former European Central Bank President, Mario Draghi, signed off with a final cry for governments in the Eurozone to support their economies to help the central bank’s monetary policy be most effective. On Friday, the Euro held onto gains against the US Dollar as markets anticipated the world’s largest economy, the US, would soon join the global economic slowdown, given a slew of recent softer data. It’s not a particularly data-heavy week ahead, but the European Commission will publish its latest economic forecasts which may influence the Euro exchange rate.

USD – Looking to the Fed

US labour market data last week came in higher than economists had forecast, which gave the Federal Reserve some breathing room ahead of its next interest rate decision. However, despite the figure coming in at 128,000, better than the 85,000 forecast, job growth has been notably softer than in 2018, where the average monthly trend was around 223,000. Meanwhile, the unemployment rate ticked higher from 3.5% to 3.6%. The US Dollar fell on Friday, testing three-month lows against some other currencies as US manufacturing data disappointed, and hopes for a US-China trade deal rose, increasing risk sentiment in the market. This week there are a few high-tier data releases from the US as well as some speeches from Federal Reserve representatives which could move the US Dollar. Further movement could come from geopolitical developments between the US and China.

AUD and NZD – Kiwi hits seven-week high 

The New Zealand Dollar jumped to a seven-week high versus the US Dollar last week, outperforming other popular risk-on assets such as the Australian and Canadian Dollars. The New Zealand Dollar climbed as expectations for an interest rate cut by the Reserve Bank of New Zealand lessened. Today, the Aussie Dollar has taken a break in its gains after Retail Sales data contracted in the third quarter, highlighting a struggle for households, despite three recent interest rate cuts. The Reserve Bank of Australia will announce its latest interest rate decision on Tuesday, with markets largely expecting rates to remain on hold at 0.75%. The RBA will also release a statement on monetary policy on Friday, which could influence the Aussie Dollar.
Meanwhile, Tuesday could be an important day for the New Zealand Dollar when the latest labour market ecostats are revealed. The Unemployment Rate is expected to rise from 3.9% to 4.1% in the third quarter, while the Employment Change stat is forecast to slip from 1.7% to 0.9% in the third quarter on the year.

CAD – Increasingly tested

On Wednesday the Bank of Canada (BoC) kept interest rates on hold at 1.75%, but warned the country’s economy would be ‘increasingly tested’. The Canadian Dollar began to recover some losses against the US Dollar on Friday as market optimism that the US-China trade war would soon be at an end increased. Oil prices also rose on trade optimism which bode well for the Loonie as it’s Canada’s largest commodity. This week, the Canadian Dollar could experience some movement on Canadian labour market data released on Friday. Any reading above forecasts could help to buoy the CAD exchange rate, as has been seen in previous months. Canada’s job market is set to reach one of its best years on record, having so far added 358,1000 jobs since last December, the most in the first nine months of a year for some time, since 2002.