GBP's worst weekly performance since March
Raising the chances of a rate cut
The Pound experienced its worst weekly performance since March last week, falling by around 4.0% versus a basket of other major currencies. Market expectations for a rate cut from the Bank of England by May 2021 increased from 32% the week before, to 60%. This week the Bank of England will make its latest monetary policy announcement, and while rates aren't expected to change, investors will be keen to see if the bank gives away any clues about its stimulus plans for the future. Tuesday will see the release of labour market data which is expected to see an increase in unemployment, while wage growth is forecast to tumble. The ongoing Brexit drama with the Prime Minister's plans to go back on the Brexit agreement could offer the Pound further excuse to move.
A quicker-than-expected economic recovery
The Euro has firmed recently, climbing to its strongest level of the week against a collection of other majors last Thursday. Last week, the European Central Bank kept its monetary policy the same, and President Christine Lagarde stated that the currency bloc could experience a quicker economic recovery than previously forecast. However, at the weekend the ECB Chief stated that the bank would adjust whatever policy instruments it may need and said that the stronger Euro was hampering efforts to encourage inflation and reiterated the need for fiscal support from the bloc's nations. Final inflation numbers for the Eurozone for August will be out in the week ahead, as well as the influential German ZEW surveys.
Two weeks of gains
After months of registering losses against other currency majors, the Dollar index—which measures USD strength against a collection of other majors—managed to score its second consecutive week of advances. However, the Dollar is still trending near multi-year lows as markets await the Federal Reserve's monetary policy announcement on Wednesday. No change is expected on the topic of interest rates, but there may be more discussion on how the central bank will handle monetary policy with its recent announcement that it would allow inflation to go above target and unemployment to fall before it took action. Consumer confidence and retail numbers will also be out in the week ahead.
AUD and NZD
GBP/NZD hits two-month low
The Pound's been at its lowest level versus the Australian Dollar since December 2018, slipping by around 3.97% from it's highest to lowest levels last week as Brexit chaos consumed Sterling sentiment. However, upcoming labour market data could hinder AUD strength if it doesn't print favourably, but equally, buoy it further if it meets or exceeds forecasts. The Reserve Bank of Australia will also release its latest meeting minutes. Meanwhile, the Pound's also been softer versus the New Zealand Dollar in recent sessions, falling by 3.65% from its highest to lowest levels last week, hitting a two-month low on Friday. New Zealand growth data could influence the way the Kiwi trades this week.
On the rise
Last week, the Bank of Canada said that the economic rebound in Q3 appeared to be gaining surprising momentum, but that support would still be needed to return the economy back to health. This week has begun with the Canadian Dollar strengthening against the US Dollar as coronavirus vaccine hopes increase, but the Loonie has been kept in check as oil prices declined. Oil prices have been lower on concerns that the global economic recovery could be faltering, amid further supply increases elsewhere. This week, Canadian inflation data will be released and is forecast to show a climb on the year from 0.1% to 0.4% in August. Additionally, Retail Sales data will also be released and could influence the way the Canadian Dollar trades.