Brexit dominates the Pound
Sterling experienced more Brexit volatility last week, and the week ahead is expected to see further politically-inspired currency movements as Brexit comes down to the wire. Today, Theresa May will host a cabinet meeting amid reported calls for her to resign, before MPs vote this evening on whether to take control of the Brexit process. With uncertainty rising and the threat of a no-deal scenario still prominent, the Pound may be under pressure in the days ahead. In terms of UK economic data, the calendar is relatively quiet. However, Friday will see the release of the final fourth-quarter UK growth number, as well as Consumer Confidence and Mortgage Approvals figures.
Eurozone central bankers in focus
Last week showed the Eurozone economy is stumbling, adding to fears that a global recession could take place. Eurozone factory output came in at its weakest level for five years, while the German manufacturing industry contracted at the fastest rate in over six-and-a-half-years. On Wednesday, European Central Bank (ECB) Chief Mario Draghi will speak alongside other central bank members in Frankfurt, and their comments have the potential to influence the Euro significantly. The conference is often seen as an opportunity for the ECB to suggest policy intentions, and any change in outlook will likely be closely scrutinised. Thursday will be another important day when the German inflation reading is revealed, and Friday will close the week with high-tier German labour market stats. Further signs the Eurozone’s largest economy is slowing down could put pressure on the single currency. However, this morning has seen an unexpected improvement in German business confidence for the first time in seven months, offering some relief for the Eurozone’s largest economy.
Global growth concerns rise as Fed holds rates
Global growth concerns have hit markets recently, and last week, Federal Reserve policymakers signalled that they don’t expect further rate increases this year following four rate hikes last year. This change in stance suggests the central bank has a more pessimistic outlook for the US economy and other economists have noted the possibility of a US recession is rising. The US Dollar is sometimes seen as a safe-haven asset, so if global growth concerns continue to increase, investors may buy more Dollars or look at other safe-haven currencies such as the Japanese Yen and Swiss Franc. There are a few Federal Reserve members making statements this week at different events which may impact the US Dollar, and there are also a few high-tier economic data releases, such as Consumer Confidence on Tuesday, and the latest set of fourth-quarter economic growth readings on Thursday.
Australian unemployment hits eight-year low
Unemployment levels in Australia reached an eight-year low last week, which gave the Aussie Dollar some opportunity to climb. There are a few Reserve Bank of Australia (RBA) representatives speaking in the week ahead which may offer the Aussie Dollar some direction, but economic data is thin on the ground, meaning the AUD exchange rate is more likely to fluctuate on geopolitical and other market developments.
RBNZ interest rate decision ahead
The New Zealand Dollar also strengthened against some currency majors last week when final fourth-quarter growth figures noted an increase. However, markets are anticipating the Reserve Bank of New Zealand (RBNZ) may cut interest rates this year—something that’s likely to be negative for the New Zealand Dollar. Wednesday could shed more light on the matter as the RBNZ will announce its latest cash rate decision. While markets expect interest rates to remain on hold at 1.75%, any change in language from the central bank could impact the Kiwi Dollar. Consumer Confidence numbers will also be out on Thursday.
Canadian economic growth in focus
Last week showed Canadian inflation had ticked slightly higher in February but was still struggling below the Bank of Canada’s (BoC) target. This means BoC policymakers have some breathing space when it comes to managing monetary policy and may leave interest rates on hold in a wait-and-see approach. It’s a quiet week for economic data in Canada, but Friday will see the release of one high-profile stat—the latest Gross Domestic Product (GDP) growth number. Economists expect an increase from 1.10% to 1.50% on the year in January, which may offer the Canadian Dollar some opportunity to climb.