Pound loses ground in 2022
Dovish rate hike
This year so far, Sterling has dropped by 9.6% versus the US Dollar, and 3.4% against the Euro. Last week, the Bank of England delivered what's been deemed as a dovish 50 basis point rate hike, which caused Sterling to tumble against other currency majors. Two members of the BoE's Monetary Policy Committee voted to keep rates on hold following on from November's rate hike, as they weigh the impact of previous increases. It's a relatively light week for data ahead, but highly influential UK growth data will be released on Thursday, with forecasts for a tumble from 4.4% to 2.4% on the year in Q3.
Agressive policy action
The Euro has been strengthening against the US Dollar, with more economists now forecasting aggressive policy action from the European Central Bank in 2023. Last week, the ECB hiked by 50 basis points, and Chief Christine Lagarde's hawkish comments helped give the Euro some buoyancy. It's a data-light week for the Eurozone, too, ahead of the Christmas holiday, with only the Eurozone's Consumer Confidence release on Tuesday worth noting.
Busy week for data
Despite a busy week last week, the US Dollar broadly opened and closed the week at the same levels. The Federal Reserve opted to hike interest rates again last week, and some policymakers said that rates might have to climb by more than markets currently expect to bring down inflation. It's a busier week for US data, with the Federal Reserve's preferred inflation reading being released on Friday. It's expected that the core reading will show a decline from 5.0% to 4.7% in November. Additionally, Q3 US growth stats will be released.
AUD and NZD
Pound loses ground in 2022
From the start of 2023 to now, the Pound to Australian Dollar exchange rate has fallen by 2.4%. Against the New Zealand Dollar, Sterling has tumbled by 3.5%. The ANZ Business Confidence stats will be released on Tuesday for New Zealand, followed by Consumer Confidence. Meanwhile, the Australian Dollar could be influenced by the Reserve Bank of Australia's meeting minutes, which are due for release on Tuesday. Investors in the Aussie will be looking for any forward guidance on interest rates and any change in tone from policymakers to give clues into action in the year ahead.
Inflation data ahead
Since the turn of the year to now, the Pound to Canadian Dollar exchange rate has tumbled by 2.5%. One of the key Canadian data pieces out in the week ahead will be the November inflation reading. It's expected that on the year, inflation will drop from 6.9% in October to 6.7% in November. Other data will include wage figures, retail stats, and October growth numbers.
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