All eyes on the central banks
All eyes on the MPC
Last week, the Pound slipped versus the US Dollar, falling by around 0.75%, hitting its lowest levels in about a month. In recent sessions, risk sentiment has been ebbing, causing more popularity for the US Dollar; this week, the focus has turned to central banks. The Bank of England's Monetary Policy Committee is due to meet on Thursday. Markets will be watching to see if any hawkish comments materialise that could suggest changes to interest rates might be on the horizon. UK inflation levels hit their highest on record in August, and with two new members on the committee, there's the potential for some change in language. UK data for manufacturing and services stats will be released in the week ahead, followed by consumer confidence later in the week.
No clear winner
The Euro also softened against the US Dollar last week as investor sentiment in the safe-haven currency increased. In the week ahead, German elections could be interesting for markets with no clear winner expected. A coalition of parties could see a softer outlook for the Euro if they implement more fiscal stimulus. Further data disappointments could pile pressure onto that view and support the European Central Bank's dovish monetary policy stance. Data relating to Eurozone manufacturing and services sectors will be out this week, as well as data regarding Germany's business outlook.
The US Dollar strengthened last week as market risk sentiment declined on Coronavirus concerns and anxiety over China's most indebted property developer, Evergrande, and the country's real estate sector's health increased. This week, the spotlight will be on the Federal Reserve, with the next monetary policy committee taking place on Wednesday. Markets are expecting an announcement of tapering its stimulus programme, which could help to boost US Dollar sentiment further. Manufacturing and service sector data will also be out, and the week will close with Federal Reserve Chief Jerome Powell speaking on Friday.
AUD and NZD
Meeting minutes ahead
Last week, the Pound rose around 0.4% against the Australian Dollar from where it started and has been sitting almost 2.0% higher than the low it reached on the 3rd of September of 1.8536. Meanwhile, the Pound to New Zealand Dollar exchange rate rose 0.6% from the open but has remained around 2.7% lower on the year-to-date high of 2.0075 that it reached on the 18th of August. This week, the Reserve Bank of Australia's meeting minutes will make their way onto the market, to give investors some details from the recent monetary policy meeting. However, since the meeting earlier in September, RBA Governor Philip Lowe has spoken more on the topic of quantitative easing—which is anticipated to end in 2022—and the state of the economic recovery, so the minutes are unlikely to shed too much new light. It's not a particularly busy week for data in the Trans-Tasman, but Australian services stats will be released as well as New Zealand trade balance numbers.
The Pound to Canadian Dollar exchange rate dipped by around 0.4% last week from where it began trading. Canadian inflation jumped higher than forecasts had suggested, which could be a topic for the next policy meeting by the Bank of Canada. In the week ahead, house price and retail numbers will be released, with little other influential data to move the Loonie.