GBP/USD, EUR/USD hitting highs
Last week, the Pound reached a more than three-month high versus the US Dollar, trading around the 1.3170 interbank level. The GBP/USD exchange rate marked its highest levels since 10th March as risk sentiment improved and the US Dollar weakened. In the week ahead, the upcoming Bank of England monetary policy meeting could create some interest for markets. While forecasts suggest interest rates will remain on hold, there may be talk about the economic recovery, a Brexit deal with Europe, and the potential for negative interest rates, which could all be a source of GBP movement. Final UK services data for July will also be revealed on Tuesday, followed by Construction data on Thursday.
Hitting 2018 highs
The Euro hit it's highest levels against the US Dollar since May 2018 last week at 1.1909 interbank, as the Dollar sank across the board. Data at the start of this week has shown major Eurozone economies have beat their manufacturing estimates in July, but there are reports of higher job losses within these sectors, causing concern about the health of the Eurozone. Later in the week, service sector data will be revealed, as well as German Factory Orders, and Industrial Production for some of the largest Eurozone economies.
The theme for the US Dollar last week was weakness. Against a basket of other currency majors, the US Dollar hit its weakest level since May 2018, but was able to make a slight recovery on Friday. Further weakness may occur, should risk-on mode continue, allowing more risky assets to rise, and if US data continues to disappoint. Last week showed a contraction in US growth of -32.9%, the most significant decline since records began in the 1940s. Today, influential manufacturing data will be released, which could influence the USD exchange rate, ahead of the week's highly anticipated Non-Farm Payrolls and Unemployment Rate data on Friday. Also in focus will be US lawmakers as they struggle to hammer out a stimulus package, leaving many Americans struggling without safety net payments in the interim.
AUD and NZD
Kiwi data in focus ahead of interest rate meeting
Last week, the Australian Dollar was at its highest levels since February 2019 against the US Dollar. Meanwhile, last week's highs meant the New Zealand Dollar rally totalled 22% versus the Buck since the year-to-date lows seen in March. The Aussie might maintain some of its strength moving forward given that the Reserve Bank of Australia has rejected the idea of foreign exchange intervention, commodity prices have been rising, and in comparison to other economies, the effect on the pandemic on Australians' health has been lesser.
Upcoming Kiwi data could support the New Zealand Dollar; markets will be keeping a close eye on unemployment and inflation figures, ahead of the Reserve Bank of New Zealand's meeting on 12th August. It's likely if upcoming data remains in the range of expectations, the central bank will keep interest rates on hold, which could support the NZD exchange rate. Wednesday's Oceanic session will see the release of New Zealand labour market data for quarter two. Meanwhile, The Reserve Bank of Australia will make its latest interest rate decision on Tuesday, followed by a statement on monetary policy on Friday.
Like other currency majors, the Canadian Dollar was able to take advantage of a weaker US Dollar, and register some gains. The Fed's dovish tone regarding its 'full range of tools' to facilitate the economy allowed the CAD exchange rate to climb in the middle of the week. Additionally supporting the Loonie was the higher price of oil--Canada's most lucrative commodity, and news that Toronto was entering its third stage of economic reopening. Growth data also showed an increase of 4.5% in May, up from the 3.5% forecast and previous -11.7% reading. In the week ahead, Canadian Balance of Trade, Employment Change, Unemployment Rate, and wage data could influence the CAD exchange rate.