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Euro touches three-month high as US Dollar continues its decline

GBP – The race is on, but no confidence speculation rises

US Dollar weakness has given the Pound some opportunity to recover some losses in recent sessions, but Brexit and UK politics are limiting any significant upside. The UK has experienced months of political uncertainty, and with the Conservative Party leadership race in full swing, Sterling movement will likely continue to be directed by politics. Boris Johnson is seen as the front runner, but there’s speculation that an immediate vote of no confidence could occur should he gain the Prime Minister title. Meanwhile, Wednesday will see Bank of England (BoE) members speak which may create some ripples in the market, while Thursday will see the release of the latest Consumer Confidence stats. 

EUR – Recovering losses

The Euro has touched a three-month high against the US Dollar (EUR/USD) as predictions for interest rate cuts across the pond hurt the US Dollar. The Euro has been able to climb and break its pattern of declines despite the European Central Bank (ECB) suggesting the currency bloc may need more stimulus measures. The end of this week might be influential for the Euro exchange rate, with both the German and Eurozone inflation readings due for release. Stagnation is expected on the year, which may raise questions as to whether the European Central Bank should be taking more immediate action to stimulate the economy. 

USD – How much to cut?

The US Dollar has experienced broad-based softness against other major currencies of late, as markets attempt to predict how much the Federal Reserve will ease monetary policy by. Markets now expect the central bank to cut interest rates at its July meeting, possibly by 50 basis points—something that could put more pressure on the US Dollar in the weeks to come. Federal Reserve Chair Jerome Powell’s discussion on the economic outlook and monetary policy on Tuesday could be helpful for investors trying to price in what the central bank will do with its monetary policy. Wednesday has a few high-profile data releases which could impact the US Dollar, such as Durable Goods Orders. It’s expected a fall will take place in May, following a contraction in April, but any deviation away from forecasts could create further US Dollar movement. Thursday will reveal the growth numbers for the first quarter. 

Additionally, one of the key events to watch this week will be the G-20 meeting in Osaka, Japan. Investors will be looking for developments between the US and China in a bid to gauge what may happen with their future trade relationship. 

AUD – RBA comments boost Aussie

At the start of this week, the Australian Dollar managed to surge to a 12-day high against the US Dollar as Reserve Bank of Australia (RBA) Governor Philip Lowe suggested that Australian growth could witness an upswing. There isn’t much by way of Australian economic data this week, leaving the Aussie Dollar to move on risk sentiment and geopolitical developments. 

NZD – More cuts on the horizon?

Last week, New Zealand growth came in at 2.5% in Q1 on the year—the slowest pace in five years. The figure raised questions over whether the Reserve Bank of New Zealand (RBNZ) may need to make another interest rate cut, despite rates already sitting at record lows of 1.5% after a cut in May. Bloomberg reported ASB Bank Chief Economist Nick Tuffley saying: ‘The weakness within the services sector and household spending will be particularly concerning for the RBNZ going forward. We expect the RBNZ to cut the OCR [Official Cash Rate] again in August.’ Wednesday will see the next RBNZ interest rate decision take place, with forecasts for it to remain on hold. Any comments on the matter from central bankers could cause NZD exchange rate movement. 

CAD – Canadian inflation accelerates 

Canadian inflation levels accelerated to a seven-month high last week and buoyed hopes that the Bank of Canada (BoC) wouldn’t look to cut rates in the near future. The Canadian currency rallied against the US Dollar (CAD/USD) on the news and has also gained some strength from a recent climb in oil prices—Canada’s most significant commodity. This Friday will see the release of the Canadian growth number for April. Modest expansion is expected from 1.4% to 1.5% on the year, but any reading higher could prompt the Canadian currency to surge. ​