GBP

Positive data fails to strengthen Pound

 

Last week’s UK economic data prints came in surprisingly better than expected. Unfortunately, it had little impact on the Pound which has continued to trade within its recent range. Meanwhile, in British politics, the race to 10 Downing Street continues. Front runner Liz Truss made headlines last week for her proposed shake-up of the Bank of England’s mandate; with the potential risk of disruption ahead, the Pound could feel the pressure. This week, the UK will see the release of its latest employment data, with little change expected except a decline in average earnings. It's likely British households will feel the effects all too well as the cost-of-living crisis continues.

EUR

Sentiment sinking further stil

Last week was a very quiet period for economic data in the Eurozone, and August’s lull dictated a less-than-exciting week for the Euro, which traded mostly flat. However, this week, a number of key economic indicators will print for the Euro Area. Consumer Confidence readings will be released for the Euro Area, with the ZEW Economic Sentiment prints for Germany and Europe expected to reach new lows, which are just short of those seen around the 2008 Financial Crisis. Alongside this, is the latest Eurozone GDP growth rate figure for the second quarter of 2022. Later in the week, the final on-the-year number for the Euro Area’s Core Inflation Rate in July is expected to increase to 4.0% from 3.7% previously.

USD

Is inflation peaking?

Last week, the headline event in economic news for the US was the release of price inflation data, with an unexpected drop in prices causing a positive stir as markets considered if US multi-decade-high inflation was indeed beginning to peak. Some Federal Reserve policymakers suggested that they would support a slowing of interest rate hikes in light of the data, which caused a retreat for the US Dollar. This week, the US economic data calendar features releases in Retail Sales figures and the Federal Open Market Committee’s meeting minutes, which may give some more context to its new no-holds-barred approach to stamping out inflation and could lead to further movement for the Greenback.

AUD and NZD

RBNZ set to hike another 0.5%

The Sterling to Australian Dollar finished the week 0.77% lower than it started after a tough week for Aussie sentiment and the Pound to New Zealand Dollar pair softened by 1.44%. Last week, the Westpac Consumer Confidence Index for August in Australia slipped deeper into negative sentiment compared to the previous print, and further again away from the threshold rate of 100 which it first broke in March. The report showed sentiment among mortgage owners has especially deteriorated as concerns around the effects of rising interest rates grow. Confidence in the job market had improved, and fresh employment data out this week will include wage growth, which has been slow despite the country’s low unemployment levels. Low wage growth may mean that rising interest rates can be more effective in their pursuit of dampening inflation, but it’s a cause for concern for Aussie consumers as they watch their spending power shrink.

In New Zealand, Credit Card Spending for July showed a decline, with a key contributor being the fall in fuel prices in the second half of the month. However, recession concerns are surfacing for the second half of 2022 in New Zealand as households and businesses alike fear soaring prices and rising borrowing costs. This week, the Reserve Bank of New Zealand Press Conference will take place, with a 0.50% rate hike anticipated. A continuation of the RBNZ’s aggressive rate hiking cycle, which aims to fight 30-year high inflation, will put a squeeze on consumers. However, commentators have noted that due to a tight jobs market and the threat of even higher prices, spending habits haven’t yet reflected these pressures.

CAD
Homeowners seek certainty

The Pound to Canadian Dollar exchange rate gained 0.3% over the past week with little Canadian data to trigger positive moment for the Loonie. The BoC is still expected to continue to tighten monetary policy in its next meeting; according to Reuters, more Canadians are moving to fixed-rate mortgages in an effort to find stability in an uncertain economy as the country faces further increases in borrowing costs. This week, Canadian Manufacturing Sales figures and the latest indicators of consumer spending will be released alongside the headline Consumer Price Index data for July. This important measure of inflation has been climbing to reach an annual rate of 8.1% in June amid the global cost-of-living crisis, mainly driven by the rising cost of gas and oil. However, last month’s increase was more muted than expected and so markets will be watching for signs of slowing inflation. As in the US in the past week, any signs that inflation is peaking could lend further strength to the Loonie.