Emergency summit may give Brexit direction
Last week, the UK services sector contracted for the third consecutive month in March on account of Brexit concerns—this is the first time this has happened since the wake of the Global Financial Crisis in March 2009. The Pound has begun the week on the front foot as optimism rises that cross-party talks could lead to a Brexit compromise. Wednesday will see a slew of UK data released, detailing Industrial Production and Manufacturing Production numbers, as well as Trade Balance, monthly Gross Domestic Product (GDP) growth, and Construction Output figures. However, it’s likely further developments in Brexit will be the main cause of movement for the British currency, and the EU will be meeting for an emergency summit on Wednesday where the prospect of a delay to Article 50 will be discussed.
ECB rate decision in focus
Eurozone inflation hit its weakest level in two years last week in yet another sign that the currency bloc’s economic progress is losing momentum. Additionally, Germany posted its biggest decline in factory orders for two years, with a -8.4% fall. This is the biggest contraction since the effects of the Global Financial Crisis were in full swing in 2009. Wednesday could be a day of significant movement for the Euro exchange rate with the latest European Central Bank (ECB) meeting taking place. The follow-up press conference with ECB Chief Mario Draghi will likely create some Euro movement, and more dovish comments could put pressure on the common currency.
US payrolls stat beats forecasts
Last week saw the monthly release of the US Change in Non-Farm Payrolls stat, which beat forecasts coming in at 196K in March, instead of the 180K expected. However, Average Hourly Earnings data disappointed, showing a fall from 3.4% to 3.2% on the year and providing more support to fears that a slowdown in the US economy could be looming. In terms of economic data, there are a few key releases this week which could create some USD exchange rate movement. The March US inflation reading will be out on Wednesday and could be a significant source of movement; inflation is often one of the key pieces of data that central banks look to when regarding monetary policy. Meanwhile, the Federal Reserve’s March meeting minutes will also be revealed on Wednesday, which could be another event of influence.
RBA expected to cut interest rates
The Australian and New Zealand Dollars weakened on Friday as the US jobs report came in stronger than anticipated. The Australian Dollar has been stuck in a tight trading range against other majors as markets largely expect the Reserve Bank of Australia to cut interest rates later in the year after some recent dovish comments. There are a few pieces of data out in the week ahead which could influence the Aussie Dollar, including Australian Home Loans stats, Consumer Confidence, and Consumer Inflation Expectations. The Reserve Bank of Australia will also release its financial stability review on Friday, and comments made by central bankers throughout the week could be influential for the Australian Dollar too.
RBNZ rate cut prospects hinder Kiwi
The New Zealand Dollar softened against its Australian counterpart last week on the divergence of monetary policy between the two nations. New Zealand’s central bank expects a rate cut as its next move. In terms of economic data, there are a few pieces out this week which could be influential for the New Zealand Dollar, including House Sales and the Manufacturing Purchasing Managers’ Index (PMI).
Strong job streak at an end?
In March, Canada recorded its first fall in jobs in seven months after a period of strong gains which put the Canadian Dollar on the back foot on Friday. Future comments by the Bank of Canada (BoC) will be in close focus as it has previously stated that a strong labour market will help an economic rebound this year. Canadian Housing Starts and Building Permits stats will be out on Monday, detailing the strength of the housing market and could be a moderate influence on Canadian Dollar movement. Meanwhile, Thursday will see the Canadian New Housing Price Index released.