Sterling reaches highest level since 2018
Highest level since 2018
Last week, Sterling managed to hit its strongest value since April 2018 versus the US Dollar as the UK raced to innoculate citizens with the coronavirus vaccine. With the recent change in US leadership, Boris Johnson's been dealt a swift blow after being told new trade agreements weren't at the top of President Biden's priority list. However, the Pound's been able to strengthen following the Bank of England downplaying the possibility of negative interest rates and an uptick in some ecostats. That being said, the UK services sector showed more contraction than expected last week. The World Economic Forum will take place this week, and Bank of England Chief Andrew Bailey is due to speak, giving markets another opportunity to look out for negative interest rate clues. The week ahead could be an interesting one for UK economic data, with the release of Employment Change, Average Weekly Earnings, Unemployment Rate, Housing Prices, and Markit's Manufacturing Purchasing Managers' Index due out for release.
ECB policy remains unchanged
European Central Bank policymakers chose to leave monetary policy unchanged last week. ECB President Christine Lagarde will speak at Davos this week, which may give the Euro some opportunity to fluctuate. German data will take the spotlight in the coming sessions, with Consumer Confidence, Inflation Rate, Unemployment Change, Unemployment Rate, and GDP Growth Rate numbers due out of the Eurozone's largest economy. Eurozone unemployment and manufacturing stats will also be revealed, as well as sentiment readings and some speeches from European Central Bank representatives.
Falling on risk sentiment
The US Dollar appears to be continuing on its softer trajectory as looser monetary policy and the chance of more fiscal stimulus weigh on the safe-haven US currency. Markets are awaiting news on whether Joe Biden's $1.9tn pandemic relief stimulus package and attempt to ramp up vaccine delivery will happen. Going into today's session, the Dollar has been sold off, allowing other riskier currencies, the Pound, and the Euro, to all gain. This week, the International Monetary Fund will release its World Economic Outlook. It's a bumper week for highly influential US domestic data which will reach markets in the form of Consumer Confidence, Durable Goods Orders, GDP Growth Rate, and PCE Price Index stats. Additionally, the Federal Reserve will announce its latest interest rate decision, and hold its follow-up press conference.
AUD and NZD
Improved risk appetite
Last week, the Pound climbed against the Australian Dollar somewhat, while remaining in a tight range against the New Zealand Dollar. The Pound is trading around 1.73% higher against the Australian Dollar versus the January low, and approximately 2.02% higher versus the New Zealand Dollar from it's lowest level of the month. Both the Australian and New Zealand Dollars have benefitted from improved risk sentiment, where investors have been shying away from safe-haven assets. However, Sterling's been able to strengthen after Bank of England policymakers downplayed the likelihood of negative interest rates, and improved economic data began to filter through. Additionally, the removal of Brexit as an immediate risk event has helped to offer the Pound a reprieve, allowing it to climb against some other majors.
Australian Inflation Rate, the Westpac Leading Index, and manufacturing data will be released in the week ahead. Meanwhile, New Zealand data is relatively thin on the ground, but Balance of Trade figures will be released. Both Trans-Tasman currencies will likely fluctuate on risk sentiment, as well as commodity prices—particularly dairy for the New Zealand Dollar and gold and iron-ore for the Australian Dollar.
Last week, Sterling gained around 0.6% against the Canadian Dollar, and is currently trading around 1.25% higher than the January low. Meanwhile, versus the US Dollar, the Loonie was last week trading near it's strongest level in almost three years following the Bank of Canada leaving interest rates unchanged—it's since fallen by around 1.0%. The central bank said that the arrival of coronavirus vaccines and increased foreign demand had created a brighter outlook for the medium-term domestic economy. The BoC also said that it would look to cut its quantitative easing programme as the economy strengthens. Average Weekly Earnings, Building Permits, and monthly GDP data will all be revealed in the week ahead, providing a reasonable opportunity for the Canadian Dollar to move.