The Pound fell by around 1.0% versus the US Dollar last week and tumbled by another 0.5% overnight. 'Freedom Day' has come to the UK, where most restrictions are being lifted, despite a dramatic increase in infection rates and mixed actions from government officials. In the week ahead, a speech by Bank of England Monetary Policy Committee member Jonathan Haskel will take place on Monday, followed by Retail Sales, services, and manufacturing stats later in the week.
The Euro slipped below the 1.18 interbank level briefly last week as a risk-off tone swept the market, causing the Euro to drop to its weakest level since the 5th of April. In the week ahead, Thursday's European Central Bank meeting will be one of the focal points. Investors will be looking at whether policymakers will opt to extend their current stimulus measures. If they do, it could create further downward pressure on the Euro. A follow-up press conference will also take place, which could move the common currency. Additionally, this week, manufacturing and confidence data will be published.
The US Dollar has been climbing in recent weeks, rising by around 4.0% on a trade-weighted basis since May to reach its strongest levels since the start of April. Generally, markets are anticipating that the Federal Reserve will be looking to tighten monetary policy soon. The risk-off mood of the market is likely to support the Dollar further. However, with many Americans hesitant to get the vaccine, the economic recovery could be in jeopardy. It's estimated only around half the population has received two vaccines. It's not a heavy data week, and the services and manufacturing stats due for release on Friday are likely the most influential for the week.
AUD and NZD
Last week, the Reserve Bank of New Zealand chose to keep interest rates on hold at 0.25% while announcing an end to its quantitative easing programme after a positive rebound in business confidence, alongside a stronger labour market and increased inflationary pressures. This increase in consumer prices was demonstrated later in the week when inflation climbed at its fastest pace in around a decade in Q2, which pushed the Kiwi Dollar higher as expectations rose for the tightening of monetary policy in the months to come. The New Zealand Dollar to Pound exchange rate appreciated by around 1.5% last week. The Unemployment Rate reading showed a favourable drop lower in Australia, from 5.1% to 4.9%. Still, the spread of Covid in cities has caused the Australian Dollar to hit its lowest level against the US Dollar in 18 months.
The Reserve Bank of Australia will release its meeting minutes in the week ahead, and Australian Retail Sales, manufacturing, and services data will be released. It's a quiet week for New Zealand stats, leaving the Kiwi to fluctuate on other geopolitical developments.
Cutting growth forecasts
Last week, the Bank of Canada opted to keep interest rates on hold at 0.25% but announced it would begin tapering its stimulus measures while also cutting growth forecasts for the year. The central bank now forecasts 6.0% growth in 2021, down from the previously more optimistic 6.5% after lockdowns and restrictions hindered recovery. Despite this, growth predictions for 2022 were positively revised higher, shifting from the earlier 3.7% expectation to 4.6%. The US Dollar rose to a five-month high against the Canadian Dollar, reaching just above the 1.28 level. The New Housing Price Index and Retail Sales stats are the most influential by way of Canadian domestic data this week and could provide a moderate influence over the Loonie. Other factors which could influence the Loonie include oil price changes and geopolitical events.