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Coronavirus impacts data, Brexit back on the table

Renewed weakness 

Last week the Pound began to show renewed weakness as economic data started to paint the effects of the coronavirus pandemic. Ecostats showed a sharp decline in March’s UK Retail Sales figure as the coronavirus took hold, as well as a dramatic fall in wage growth, a worse-than-expected claimant count rate for unemployment, and a significant drop lower in inflation—the sharpest one-month fall in a decade. There were also comments from Rishi Sunak that the UK may have to face the most severe recession in its history, and the Bank of England also said that negative interest rates may be brought in to support the economy. Moving into the end of Q2, Britain not only needs to cope with the pandemic, but also Brexit. Brexit might have been in the back seat while politicians questioned how to handle covid-19, but with June the last month the UK can ask for an extension fast approaching, the UK’s exit has come into sharper focus. Negotiations begin again on June 1st and so far little progress has been made. There are no highly influential data releases due out in the week ahead for the UK, but there are some moderately important data points which may create some GBP movement, such as manufacturing, mortgage, and house price data.

Recovery fund 

Last week, the Euro managed to climb after the European Commission prepared plans for a €500bn recovery fund. Meanwhile, a lot of the focus was also on the release of the European Central Bank’s meeting minutes, which hinted at further policy easing in June. The central bank has forecast the Eurozone economy could contract by around a tenth in 2020 as a result of the coronavirus and stated it’s ‘fully prepared’ to take action and offer more stimulus. Today, the European Central Bank will publish its Financial Stability Review ahead of central bank speeches and inflation data due out later in the week. 

Safe-havens climb 

By the close of the week, risk-off sentiment had flooded the market, meaning while safe-haven assets such as the US Dollar, Japanese Yen, and gold had all gained, other currencies seen as riskier assets were softening. More global uncertainty, heightened tensions between the US and China and Hong Kong developments caused some flight to safety, allowing the USD exchange rate to climb. Today, US Consumer Confidence data will reach the market, which is expected to increase, followed by highly influential Durable Goods Orders, GDP Growth Rate, and PCE Price Indexes later in the week, all of which could create USD movement. Meanwhile, any risk aversion could boost the Dollar further.

Two-month high 

The Australian Dollar rallied in several sessions last week, hitting a two-month high of 0.7032 against the US Dollar. Investor sentiment in the Oceanic currency increased as hopes for a rebound from the coronavirus-induced shutdown heightened. The New Zealand Dollar experienced some choppy trading, but strengthened on comments from Reserve Bank of New Zealand Governor Adrian Orr when he confirmed the central bank wasn’t in a hurry to implement negative interest rates. 
It’s a relatively quiet week ahead for Aussie and Kiwi data, with just a few medium-tier prints such as New Zealand Business Confidence and Australian Manufacturing Index stats. Any hints from the Reserve Bank of Australia regarding interest rates ahead of the next meeting on June 2nd could influence the Aussie Dollar.

Growth data ahead 

Towards the end of last week, the Canadian Dollar softened against the US Dollar—despite having noted a climb in earlier sessions—as US-China tensions increased, raising concerns the disputes could impact global growth which weighed on sentiment. Today, Bank of Canada Governor Stephen Poloz will speak, ahead of highly influential Canadian GDP growth rate data released on Friday. Building Permits and Average Weekly Earnings will also be out this week, and any fluctuations in the price of oil—Canada’s largest commodity—could influence the Loonie’s value.