Italy in recession, will the rest of the Eurozone follow?

Pound - GBP 

UK construction data falls

The Pound’s been trending higher against other currency majors such as the Euro and the US Dollar in recent weeks, but Friday saw the British currency soften. With less than two months to go, Brexit uncertainty is sweeping Britain. Friday highlighted a decline in British manufacturing in January, with the Markit UK Manufacturing Purchasing Managers’ Index (PMI) coming in at 52.8, down from 54.2 in December, and bypassing the forecast 53.5. In this index, 50.0 is the line that separates expansion from contraction, and so any fall closer to this threshold in the months ahead could be even more damaging to Sterling. The Pound is starting the week above 1.30 interbank against the US Dollar, and 1.14 versus the Euro, but there are plenty of events which could impact the GBP exchange rate in coming sessions. Monday has already seen Markit’s Construction PMI slip from 52.8 in December to 50.6 in January, despite forecasts for a reading of 50.6. UK services data will be out on Tuesday and could be particularly interesting given the sector makes up a large proportion of UK economic growth. Thursday will be another day to watch with the Bank of England (BoE) due to make its February interest rate decision and release its latest inflation report. Any developments in Brexit could play a large part in Sterling’s movement in the coming weeks.

Euro - EUR

Italy enters recession

Economic news from the Eurozone has been disappointing of late, and last week showed Italy had entered a technical recession. Although this marks the third fall into recession in a decade, it’s the first time the economy has noted continuous contraction since 2013. Weak growth in the Eurozone as a whole could rule out any interest rate increases by the European Central Bank (ECB) in the year ahead, while some suggest it may have to look at stimulus measures again.  Eurozone Retail Sales data will be revealed on Tuesday, while the rest of the week will see a host of German ecostats hit the market. The ECB will publish its Economic Bulletin on Thursday.

US Dollar - USD

US data prints positively

Last week, the US Dollar was offered some support when the latest Change in Non-Farm Payrolls stat came in well above forecast. The January figure was expected to print at 165K, after December’s 312K, but instead, showed 304K people had found jobs. At the minute, trade tensions between the US and China are being closely watched and could create US Dollar movement. The week ahead also has a few economic events which might impact the USD exchange rate, such as Tuesday’s ISM Non-Manufacturing/Services Composite index. A few Federal Reserve officials are also scheduled to speak throughout the week, and any comments on monetary policy could spark USD movement.

Australian Dollar - AUD

RBA interest rate decision ahead

Australian Building Approvals data have hindered the Aussie today after the December figure contracted by -8.4% on the month, despite expectations for a +2.0% rise. On the year, the figure managed to reclaim a bit of ground, coming in at -22.5% in December, after November’s -32.8% annual decline. It could be a busy week for the Australian Dollar with a number of pieces of economic data due out in the week ahead. Tuesday will be an interesting day with the Reserve Bank of Australia (RBA) due to make an interest rate announcement; expectations are for the central bank to keep rates on hold at 1.50%. Speeches from central bankers and comments regarding interest rates will be closely watched, as some experts are forecasting the chance of a rate cut by the end of the year.

New Zealand Dollar - NZD 

Kiwi reaches six-week high

Last week, the New Zealand Dollar managed to trade at a six-week high against the US Dollar after the Federal Reserve gave off an air of caution on the prospect of future rate increases. Additionally supporting the Kiwi Dollar last week was credit ratings agency Standard and Poor’s decision to revise New Zealand’s economic outlook to positive from stable. The ratings agency suggested that the country has flexibility in its monetary policy and economic wealth and resilience. In the week ahead, investors will be looking towards New Zealand’s Unemployment Rate and Employment Change numbers on Wednesday which could offer some NZD exchange rate movement.

Canadian Dollar - CAD 

Canadian Dollar recovers some ground

The Canadian Dollar was able to achieve a three-month high versus the US Dollar on Friday as oil prices increased. The move came despite economic data on Thursday showing the Canadian economy’s growth had slowed at the end of last year. In the week ahead, Friday will likely be a day to watch for Canadian Dollar movement with the release of domestic labour market stats. The Canadian Unemployment level is expected to inch up slightly from 5.6% to 5.7% in January, while wages are also forecast to make a slight gain from 1.5% to 1.6% in January on the year.