On Thursday and Friday, the Pound climbed rapidly against the US Dollar, reaching a four-month high of 1.2707 as market expectations for a Brexit breakthrough rose. However, there could be some volatility ahead after comments at the weekend that Boris Johnson’s Brexit deal isn’t quite up to scratch. European Commission President Jean-Claude Juncker said that an extension past the 31st October deadline would be needed. While it’s another critical week for Brexit, the British Pound may also find some influence from speeches by the Bank of England. Several policymakers are expected to speak about monetary policy across the week, and BoE Governor Mark Carney will speak in a Parliamentary testimony on Tuesday and an IMF event on Wednesday. Both inflation and labour market data will also be out this week.
Recent economic data from the Eurozone has painted a less optimistic picture, so it’s not a surprise that the European Central Bank chose to provide monetary stimulus for the bloc. Last week, it was revealed that ECB Chief, Mario Draghi, pushed through the latest bout of quantitative easing against the advice of other officials. Markets are concerned that objections to the reintroduced stimulus could hinder attempts to increase the scheme if economic data continues to head south. The Euro has mostly maintained recent gains versus the US Dollar, climbing above 1.1000 for the first time in a fortnight. The start of this week has a few high tier ecostats due out of the Eurozone, but the data stream will ebb as the week goes on. Developments in Brexit will likely determine the EUR/GBP exchange rate’s direction.
At the end of last week, the US and China appeared to be making some progress, with China agreeing to increase its purchases of US products, while the US opted to hold fire on this week’s scheduled tariff increase. This sign of progress is welcomed by markets, but viewed with caution; given the US and China’s trade talk history, often resolutions haven’t lasted long. Today the Pound to US Dollar (GBP/USD) exchange rate has dipped below the 1.26 threshold after comments from EU officials over the weekend regarding Brexit. US markets are closed for a public holiday today, but there are several pieces of data out in the week ahead, which could impact the US Dollar, not to mention geopolitical developments.
Towards the end of last week, the Australian and New Zealand Dollars firmed at the end of last week as positive speculation regarding the US-China trade talks circulated, and the US Dollar weakened. The Aussie and the Kiwi have been sensitive to trade developments between the US and China, as China is both Australia and New Zealand’s largest trading partner. Last week, Australian Consumer Confidence dropped to its lowest level in four years in October, despite recent interest rate cuts hoped to boost the economy.
New Zealand inflation data will be out on Tuesday and forecasts expect the figure to fall, which could create some Kiwi Dollar softness. Meanwhile, Tuesday will also see the Reserve Bank of Australia release its October meeting minutes. Thursday will follow with labour market data and a speech from RBA Governor Philip Lowe.
Last week, the Canadian Dollar hit a one-month high against the US Dollar after labour market data smashed expectations. Markets took the figure as a sign that the Bank of Canada had economic support to keep rates on hold at this month’s meeting, which boosted the Canadian currency. It’s a relatively quiet week for Canadian data, but Wednesday will reveal the latest inflation figures for the nation. Market expectations are for an increase in consumer prices in September on the year, from 1.9% to 2.1%, which may boost the Canadian Dollar if true.