Commodity currencies receive a boost
Softer against all other G10 majors
The Pound has put in a poor performance in the last week, falling against all other G10 currencies while safe-havens have noted an increase in popularity. Meanwhile, UK Consumer Confidence levels have dropped to their lowest since January 2021 as the cost of living, tax rises, and the prospect of the Bank of England's hiking cycle threatens to squeeze household finances. While the growth picture has been clouded in recent weeks, Deputy BoE Governor Dave Ramsden has said more modest tightening might be needed. In the week ahead, numerous BoE members are due to speak, which may have some impact on the Pound. UK house price data will also be released.
Euro tumbles against US Dollar
The GBP/EUR exchange rate closed 0.78% softer last week after hitting two-week lows. The Euro fell 1.80% against the US Dollar last Thursday as Russian troops entered Ukraine, but the common currency has since recovered somewhat. The conflict could potentially slow down growth in the Eurozone this year, which may be an additional headache for the European Central Bank, which will need to manage slowing growth alongside rising inflation. Inflation data will be released in the week ahead, alongside Eurozone Retail Sales. The European Central Bank Monetary Policy Meeting Accounts will also be released.
GBP/USD hits nine-week lows
The Pound closed last week 1.32% lower versus the US Dollar after reaching nine-week lows. The US Dollar has seen huge demand recently due to the situation in Russia and Ukraine, with the Dollar Index climbing by over 1.00% in the last week. The US Dollar looks set to continue strengthening in the coming weeks, with some particular strength against the Euro seeming likely, as the West increases its response to Russia's aggression. Over the weekend, it was announced that certain Russian banks would be excluded from the SWIFT network in a bid to place economic pressure on the nation. The US and Europe haven't included energy in sanctions, but Russia could retaliate to Western measures by restricting gas flows to Europe, which receives 40% of its supplies from Russia. Markets are pricing in a 25 basis point interest rate hike in the Federal Reserve's March meeting, rather than the 50 basis point expectation just last week, given the conflict and geopolitical uncertainty it brings with it.
AUD and NZD
Commodity currencies receive a boost
Last week, the Reserve Bank of New Zealand increased interest rates once again in line with economists' forecasts. This week, the Reserve Bank of Australia is scheduled to meet, but markets expect interest rates to remain at 0.10%. Commodity currencies have received a boost against other majors on the back of the Russia-Ukraine conflict and the increase in commodity prices. The Pound to Australian Dollar exchange rate closed the week 2.18% weaker, and registered nine-week lows. Meanwhile, the Sterling to New Zealand Dollar currency pair finished the week 2.00% lower and recorded seven-week lows. While it's a quiet week for New Zealand data with only the Building Permits stat worth noting, Australia will release multiple influential data points. Aside from the RBA interest rate decision and RBA Chart Pack release, highly significant growth data will make its way onto the market. Services, retail, building, trade balance, and loans stats will also be released.
Loonie supported by higher commodity prices
Last week, the Pound closed 1.66% lower versus the Canadian Dollar and registered four-week lows. Meanwhile, the US Dollar managed to reach its highest level against the Loonie since the 22nd of December 2021, as US Dollar demand outweighed the Canadian Dollar's support from higher commodity prices on the back of the Russia-Ukraine conflict. It's an exciting week for Canadian data, with some high-tier figures and central bank events scheduled. In terms of ecostats, growth figures for December and Q4 will be released, with expectations for the annualised rate to reach 6.20% in the final quarter of the year, up from the previous 5.40% reading. Additionally, manufacturing data will be released, as well as building stats and the Ivey Purchasing Managers' Index, which gauges economic activity across a range of elements. However, Wednesday will see the Bank of Canada announce its latest interest rate decision, with markets expecting an increase from 0.25% to 0.50%. On Thursday, Governor Tiff Macklem will make a speech, and markets could hang onto his words to try and gauge future monetary policy decisions.