US Dollar, going down
Last week, the Pound was supported by data showing the UK services sector and retail sales had rebounded more quickly than expected. The UK services sector makes up a large portion of the UK’s economic growth, and so the Markit Purchasing Managers’ Index showing a rebound from 47.1—contraction territory—into the range of expansion of 56.6 offered the British currency some support. Today, the Pound is trading at its highest levels since March 12th versus the US Dollar as the Buck weakens across the board on a number of factors. It’s a relatively quiet week in terms of UK economic data, with only Mortgage Approvals, Mortgage Lending, and Nationwide Housing Prices the only data of moderate influence. However, Brexit developments may also impact Sterling.
An almost two-year high
Last week, the Euro gained some support from data showing an upswing in manufacturing across Germany and the Eurozone as a whole, as well as the flash readings for German and Eurozone services Purchasing Managers’ Indexes. The Euro is trading at an almost two-year high versus the US Dollar after agreements regarding the fiscal support of Eurozone nations in a coronavirus recovery fund, supported the Euro. In the week ahead, German labour market data, inflation, and growth numbers will be out, as well as the European Central Bank’s latest Economic Bulletin. Highly influential Eurozone growth, and inflation numbers will also be out at the end of the week, which could create some EUR exchange rate movement.
US Dollar heads south
There are a number of reasons for US Dollar’s recent softness; tensions between China and the US are rising, there are growing fears of further pandemic strife in the USA, and investors are concerned that the Federal Reserve might take action and cut interest rates again. The selloff in the Dollar has translated into strength in other safe-havens, such as the Swiss Franc, Japanese Yen, and gold—which is at an all-time high. In the week ahead, several pieces of high-tier data will be available, such as today’s Durable Goods Orders, as well as Consumer Confidence, inflation, and growth data. In addition, the Federal Reserve will announce its latest interest rate decision—rates currently stand at 0.25%. The follow-up press conference with Fed Chair Jerome Powell could offer the US Dollar some further opportunity to move.
AUD and NZD
Rallying Aussie may be limited
The Aussie Dollar has been rallying, reaching 15-month highs against the US Dollar in recent sessions. Aussie strength increased after the Reserve Bank of Australia dismissed the possibility of a dip into the negative for interest rates. However, this week, Australian inflation data will be revealed, which could create some significant influence for the way the Aussie Dollar trades. If the inflation data causes the RBA to shift to a dovish tone in the upcoming meeting on August 4th, the recent Aussie Dollar rally may be hindered. The Australian Dollar has climbed by around 16% versus the US Dollar since March on the back of economic improvements in China, and positive covid vaccine news. Meanwhile, the New Zealand Dollar has also increased in recent sessions as risk appetite took an upswing. This week, moderate data in the form of Building Permits and Business Confidence will be out from New Zealand and could create some opportunity for NZD exchange rate movement.
The Canadian Dollar finished the week higher against the US Dollar last week as the Buck softened against a basket of other currency majors. The Canadian Dollar hit a six-week high versus the US Dollar on Thursday. In the week ahead, Canadian wage data will be released, as well as growth stats for May, which could cause some moderate movement for the Loonie exchange rate. The price of oil might also influence the Canadian Dollar. While last week oil prices supported the Canadian Dollar, for the most part, black gold prices have been impacted by the recent tensions between the US and China, as well as the global pandemic.