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European elections and Theresa May's plans to resign

Pound - GBP

Inflation and interest rates in focus

The Pound dropped below 1.28 against the US Dollar last week, recording its weakest level since February. Once again, Brexit was the reason for Sterling’s softness, and Theresa May is expected to lay out details of when she’ll resign. The Pound has also been declining consistently against the Euro. Aside from Brexit, a few other developments could impact the British currency this week. On Tuesday, Bank of England (BoE) Governor Mark Carney will speak in London. Comments from the central bank mogul on the state of the economy, interest rates, or Brexit could all impact the Pound. Meanwhile, the latest UK inflation readings will be out on Wednesday. While the core measure is expected to edge up from 1.8% to 1.9% on the year in April, the non-core reading is expected to jump from 1.9% to 2.2%. If this is the case, it’s likely questions will be raised as to whether the BoE might need to make a quick interest rate hike once Brexit has some clear direction. 

Euro - EUR

European elections ahead

The Euro managed to shrug off some disappointing German and Eurozone economic outlook data last week. Meanwhile, Eurozone inflation readings fell in line with forecasts, but European Central Bank (ECB) member Klaas Knot said at the weekend that consumer prices were still too low. On Wednesday, European Central Bank Chief Mario Draghi will speak in Frankfurt, alongside some other ECB officials, which could cause some significant market movement. Additionally, the European parliamentary elections kick off on Thursday and continue through the remainder of the week. Investors will be watching the results closely to see whether populist parties garner a surge of support. 

US Dollar - USD

Trade relations falter

The trade relationship between the US and China hit another hurdle last week, with US President Donald Trump placing more tariffs on Chinese imports. A rise in geopolitical tensions like these can often cause a surge in safe-haven assets like the Japanese Yen and Swiss Franc. Meanwhile, the US Advance Retail Sales number slipped in April, causing the US Dollar to soften slightly. There are a few events which could impact the USD exchange rate this week, including a speech by Federal Reserve Chief Jerome Powell late on Monday, the Federal Reserve’s May meeting minutes publication on Wednesday, and the US Durable Goods Orders figure on Friday. 

Australian Dollar - AUD

Surprise election result

The Australian Dollar came under pressure last week as the election approached, trade war developments heated up, and economic data faltered. The Australian Unemployment Rate rose unexpectedly from 5.0% to 5.2% in April, while Home Loans data contracted by -2.8% in March. The Australian Dollar has started this week on the front foot, climbing by around 0.9% against the US Dollar. The Aussie currency rose following the weekend’s election result which saw the conservative Liberal-National coalition remain in place, despite polls suggesting a different result might occur. The Reserve Bank of Australia (RBA) will release its latest meeting minutes from its May policy meeting this week, and investors will be looking for any mention of an interest rate cut. RBA Governor Philip Lowe will also give a speech in Brisbane on Tuesday. 

New Zealand Dollar - NZD

Manufacturing ticks higher

The New Zealand Dollar slipped last week as trade tensions between the US and New Zealand’s largest trading partner, China, intensified. In more positive news, manufacturing data for April showed an increase in productivity, which bodes well for the domestic economy. There are a few pieces of data out in the week ahead, which could impact the NZD exchange rate, as well as a dairy auction which might feed into Kiwi Dollar values. However, geopolitical tensions are likely to be a key driver for currencies such as the Aussie and Kiwi Dollar, likely causing softness if risk sentiment declines. 

Canadian Dollar - CAD

Oil prices on the up

Last week, the Bank of Canada (BoC) released a financial review, which stated that high levels of household debt and the potential for shocks to the housing market remained areas of risk for the Canadian economy. The week ahead is a quiet one in terms of Canadian economic data, which will leave the Loonie vulnerable to developments elsewhere. The CAD exchange rate might feel the impact of oil prices this week; Canada’s largest commodity has seen an increase in prices as supply has been limited.