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Pound climbs versus AUD and NZD

Interest rates rise

The Pound put in a strong performance against the US Dollar last week, climbing by around 0.56%, supported by the Bank of England's decision to hike interest rates to 0.50%. However, Sterling moved away from recent highs after the European Central Bank prompted forecasts for interest rate hikes in the Eurozone this year. There have been signs of house price normalisation emerging in the UK, with property prices growing at the slowest pace since June 2021, coming in at 0.30% in January instead of the 0.90% expected by analysts. There's a slew of UK data out in the week ahead that those interested in Sterling will watch. Bank of England Governor Andrew Bailey will make a speech this week, and his words will likely be closely monitored. Meanwhile, highly influential UK growth data will make its way onto the market, followed by moderately influential trade, construction, industrial, and manufacturing stats. Politics could also play a part in GBP trading this week, with recent Conservative Party chaos continuing to hit the headlines.

Single currency on the rise

The Euro managed to climb by approximately 2.50% last week versus the US Dollar, as European Central Bank President Christine Lagarde refused to rule out an interest rate hike later in the year. Other central bankers have also called for tighter monetary policy by the end of the year after inflation reached 5.1% in the Eurozone in January. It's a quiet week for Eurozone data, but ECB President Lagarde will speak today, and the latest EU Economic Forecasts will be out on Thursday. Additionally, a few influential German data points could influence the Euro, including inflation and trade data.

Inflation data ahead

The US Dollar drifted lower against a basket of other major currencies last week, as the UK and European central banks took more hawkish stances. Friday's Non-Farm Payrolls data showed a surprise jump in the reading, with higher Covid cases at Christmas not impacting employment and job openings continuing to rise. In the week ahead, the leading US data events will be January's inflation readings (expected to rise again, to 7.3% on the year, with a core reading of 5.9% forecast) and Consumer Sentiment data. The Federal Reserve will also release its latest Monetary Policy Report on Friday.

Pound climbs versus AUD and NZD

The GBP/AUD currency pair has moved 2.5% higher since the start of the year as the Bank of England presses ahead with monetary policy normalisation. The Reserve Bank of Australia has ended its pandemic bond-buying programme but is not expected to raise rates this year. However, Governor Phillip Lowe has opened the door to a potential rate rise in late 2022 if the labour market and inflation align with targets. Meanwhile, the Pound has gained around 3.5% against the New Zealand Dollar since the beginning of the year, the pairs' highest level since May 2020. This comes despite the market expectation of a 2.0% cash rate in New Zealand by August 2022.
This week, Australian Retail Sales data has shown a contraction in December of -4.4%, but marked a seasonally adjusted 8.2% rise in the final quarter of 2021, following a fall in Q3. In the rest of the week, Westpac will release its latest Australian Consumer Confidence Index, followed by Aussie Building Permits and Consumer Inflation Expectations stats. RBA Governor Philip Lowe will also give a speech this week. In New Zealand, markets will be looking towards this week's manufacturing data, as well as ecostats relating to card spending in NZ.

Six hikes ahead?

There has been little movement in the GBP/CAD currency pair at the start of this year, with the Pound gaining around 0.60%. The Bank of Canada has not yet moved on interest rate hikes, but the markets are expecting around six hikes this year after inflation in Canada hit a 30-year high of 4.80% in December. There isn't a vast amount of Canadian data out in the week ahead, but Balance of Trade numbers will make their way onto the market, and Bank of Canada Governor Tiff Macklem will make a speech.