Brexit, US-China trade tensions, and another potential government shutdown take the limelight

Pound - GBP

UK growth sinks

Last week, the Pound experienced some volatility when the Bank of England (BoE) signalled a lacklustre growth outlook. In response, Sterling fell before recovering somewhat. The Pound to US Dollar (GBP/USD) exchange rate dropped to levels of 1.28 after the Monetary Policy Committee (MPC) released its statement, a far cry from the levels of 1.32 seen in recent weeks. This week, the Pound’s likely to feel the effects of politics as Brexit comes back into focus. Theresa May’s withdrawal agreement will be back in parliament after the EU refused May’s bid to make changes to her deal. Now, MPs will be asked to vote on more amendments, and it’s expected that both the content of the deal and the Brexit timeline will be discussed. Monday’s begun with Sterling on the back foot against the Euro and US Dollar after the latest UK growth figures showed a sharp slowdown in the fourth quarter of 2018 at only 0.2%, down from 0.6% in Q3. Tuesday will see BoE Governor Mark Carney speak in London, ahead of Wednesday’s inflation data and Friday’s Retail Sales stats.

Euro - EUR

Eurozone growth revised

On Thursday, the European Commission drastically cut its Eurozone growth expectations for the next two years as the currency bloc faces challenges amid worldwide trade tensions. Inflation forecasts were also downgraded, which could mean the European Central Bank’s plans to hike rates later in the year might prove difficult. In response to the forecasts, the Euro dropped to a two-week low. The most influential day for Eurozone data in the week ahead will be Thursday when German and Eurozone growth data is revealed. Germany’s figure is expected to slip in the fourth quarter; declining ecostats from the Eurozone’s largest economy have been a concern for many, so the Euro might come under pressure if forecasts are accurate.

US Dollar - USD

Another government shutdown ahead?

The US Dollar could also experience some politically inspired fluctuations in the week ahead, with US-China trade talks continuing and fears that the recent government shutdown could resume. Last week, US President Donald Trump ruled out another meeting with China’s leader before March 1st—the deadline before more tariffs are introduced. Wednesday could be an interesting day for the US Dollar with the latest inflation stats due out, followed by Advance Retail Sales numbers on Thursday, and Friday’s consumer confidence reading. However, with the possibility another government shutdown could take hold from the end of the week, the US Dollar’s movements are likely to be very sensitive to the impact of politics.

Australian Dollar - AUD

Australian housing market problems deepen

The Reserve Bank of Australia (RBA) opted to keep interest rates on hold at 1.50% last week and signalled rate cuts could come if spending and incomes soften. Meanwhile, some cracks

in the Australian economy remained; Building Approvals slumped influenced by a steep fall in apartments. Australia is potentially facing its most notable housing downturn in 30 years. A drop in prices and concerns over a credit crunch are raising speculation about how the broader economy will be impacted. A few Australian ecostats will be out in the week ahead, including Home Loans, Consumer Confidence, and Consumer Inflation Expectation stats. A few Reserve Bank of Australia representatives will speak throughout the week too, which may create some AUD movement.

New Zealand Dollar - NZD

RBNZ comments in focus

Last week, New Zealand’s Unemployment Rate reading rose unexpectedly to 4.3% in the fourth quarter, up from the decade low of 3.9% in the previous quarter. The increase on account of slowing job creation caused the NZD exchange rate to soften as speculation circulated on whether the nation’s central bank would cut interest rates. Wednesday is set to be an interesting day for the New Zealand Dollar when the Reserve Bank of New Zealand (RBNZ) announces its latest interest rate decision. Economists expect rates to remain at 1.75%, but the press conference with RBNZ Governor Adrian Orr following the decision could be influential for the Kiwi. Given inflation rose in the final quarter of 2018, bets for a rate cut this year have lessened somewhat.

Canadian Dollar - CAD

Canadian economic strength on show

Despite creating 66.8K jobs in January, Canada’s Unemployment Rate increased to 5.8% from 5.6%, and above the 5.7% forecast last week. The bumper jobs number smashed expectations of only a 5.0K increase after December’s 7.8K; hourly wages also increased slightly. However, given the slow pace of wage growth and dents to the oil and gas sector, it’s thought unlikely the Bank of Canada (BoC) will move to adjust interest rates in the upcoming March 6th monetary policy meeting. The week ahead is relatively quiet by way of Canadian data, but the New Housing Price Index on Thursday and Existing Home Sales stats on Friday could moderately influence the Loonie exchange rate.