Pound drops as Brexit talks turn sour
Sterling sinks as impasse strikes
Sterling hit its highest level in over two years versus the US Dollar last week, as weakness across the pond and optimism over an EU-UK trade deal boosted the British currency. The GBP/USD exchange rate broke above the interbank 1.35 level to reach 1.3539, a figure it hasn't reached since April 2018. In total, the GBP/USD exchange rate has climbed by around 10% from June's lows to Friday's highs, but has since slumped to below 1.33 as of this morning. Collectively, against a host of other majors, the Dollar has been at its weakest since April 2018. This week, Brexit deal progress will likely be one of the leading Sterling drivers with the end of the year in clear sight. British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen are expected to speak tonight which is thought to be a make or break moment for talks. The Pound has already begun to soften today as the conversation between the two sides seemingly turns sour, increasing fears of a no-deal exit. Industrial and manufacturing figures will be out this week, as well as October's growth number.
ECB bond-buying increase expected
Against a basket of other currencies, the Euro rose by almost 1.0% last week and reached interbank levels of 1.2178 against the US Dollar. In the week ahead, highly influential growth rate data for the third quarter will be released. It's expected to show a 12.6% rebound following on from the previous -11.8% decline. The ZEW Economic Sentiment Index will also be published for both the Eurozone and Germany, which could be influential for Euro movement. Meanwhile, the European Central Bank will announce it's latest interest rate decision this week. While rates are expected to remain on hold at 0.0%, the central bank is forecast to increase its emergency bond-buying programme. Following the announcement, the ECB will hold its follow-up press conference. Any reemergence of comments on disinflationary pressures could cause the Euro to soften. The week will close with influential German inflation rate stats.
Rebounding after multi-year lows
The US Dollar continued its weakness last week, extending multi-year lows. Last week's labour market data failed to impress and may play a part in raising hopes for further economic stimulus. It may be too soon for next week's policy announcement by the Federal Reserve, but labour market data will be very much on the policymakers' radar when it comes to stimulus decisions. This week begins with riskier assets—which have favoured well recently in light of Dollar weakness—taking a breather, while the Dollar climbs. A Covid stimulus package could come as soon as Monday after a group of US senators brought it forward. There's expected to be some debate on the details of it this week, but hopes remain that it can be finalised soon. Inflation and sentiment figures are some of the more prominent releases for the week ahead.
AUD and NZD
Risk assets enjoy a boost
Last week, the Australian Dollar to US Dollar exchange rate extended its rally to its strongest level since August 2018, while the New Zealand Dollar to US Dollar reached its highest level since April 2018 as riskier assets gained momentum. Meanwhile, the Pound reached it's lowest figure against the New Zealand Dollar since August 2019. In the week ahead, Australian consumer confidence and inflation data will be released. Meanwhile, New Zealand card spending stats and business activities numbers will also be out this week.
BoC rate decision ahead
At the start of last week, the Pound managed to reach 11-week highs versus the Last week, the US Dollar hit it's lowest level since May 2018 against the Canadian Dollar after falling over 1.5% last week. The week ahead is relatively quiet on the Canadian economic event front. While economic activity data will be out today, the only other influential event will be the Bank of Canada's interest rate decision on Wednesday, and a speech by the central bank's Deputy Governor Paul Beaudry on Thursday.