Significant Sterling volatility forecast with Brexit vote ahead

 

Pound - GBP 

Sterling awaits Brexit vote for GBP direction 

Last week the Pound hit a 17-month low against the US Dollar as Brexit debates got underway. There are some interesting data releases due out this week, but the main event for Sterling will undoubtedly be the Brexit vote on Tuesday. Pound volatility will likely increase significantly this week as Theresa May’s expected to face a humiliating defeat on her Brexit deal which would create many political uncertainties. Monday has also seen the European Court of Justice rule that Article 50 could be revoked, adding more fuel to Brexit unknowns. UK growth data out on Monday morning has shown only 0.1% expansion in October, another figure adding to the bout of recent economic data which has deteriorated on account of Brexit.

Euro - EUR

ECB's final monetary policy meeting looms

The Eurozone’s manufacturing sector recorded its weakest growth since 2016 last week, with Italy posting a 47-month low reading in contraction territory, while France and Germany posted lacklustre growth. The Eurozone’s also been experiencing political problems with more protests in France which could begin to impact the economy. Investors will be watching President Emmanuel Macron’s response to the developments which have instigated violence across the capital for several weeks. The European Central Bank (ECB) is expected to hold its final monetary policy meeting of 2018 on Thursday; investors will be interested to hear policymaker comments on quantitative easing which the central bank insists will be wrapped up soon.

US Dollar - USD 

Path for impeachment laid out as court papers filed 

News that the US and China had made a temporary truce offered the US Dollar some support at the start of last week. However, the Dollar came under renewed pressure as time went on when concerns regarding US growth shook markets. The US Dollar could fluctuate on account of political risk this week too. Court papers were filed on Friday night and could pave the way for impeachment proceedings for US President Donald Trump. Wednesday will see Federal Reserve Chief Jerome Powell speak, and any clues regarding the path of monetary policy could impact the US currency. It’s largely expected that the central bank will hike rates once more before the year ends. 

Australian Dollar - AUD 

Australia Dollar under pressure

Monday has seen the Australian Dollar hit its weakest level against the US Dollar in a month as geopolitical risks weigh on the Trans-Tasman currency. Risk aversion, weak Australian data, and tensions between the US and Australia’s largest trading partner, China, have put pressure on the Aussie. Tuesday will see Australian Consumer Confidence data released, ahead of Thursday’s Consumer Inflation Expectations and several Purchasing Managers’ Indexes (PMI) detailing the health of different sectors of the economy.

New Zealand Dollar - NZD

Manufacturing data ahead

The New Zealand Dollar fluctuated last week on concerns that tensions between the US and China could heat up again, as well as lower dairy price forecasts. This week, Tuesday could be an important day for the Kiwi Dollar when Reserve Bank of New Zealand (RBNZ) Chief Adrian Orr speaks at the Parliament Committee. Additionally, Thursday will see the publication of the New Zealand Business Manufacturing PMI which could be moderately influential on the NZD exchange rate.

Canadian Dollar - CAD

BoC crushes hopes for a rate hike 

The Bank of Canada (BoC) reversed hopes of an interest rate hike last week after positive comments just six weeks ago. The central bank held rates at 1.75%, and while six weeks ago it suggested ‘The global outlook remains solid,’ last week it said only ‘The global economic expansion is moderating.’ The Loonie lost almost a cent against the US Dollar as markets wrote off the prospect of a January rate hike. It’s a relatively quiet week ahead for Canadian data, but Monday afternoon will see the release of Housing Starts and Building Permits stats, ahead of Friday’s New Housing Price Index.