Learning from mistakes

Stimulus measures into 2022?

The Pound had a poor start to last week, tumbling by almost 1.6% by Tuesday afternoon. Sterling weakened versus the US Dollar, slipping briefly below the 1.36 interbank level for the first time since April. The decline came off the back of the removal of Covid restrictions, despite elevated case levels in the UK. Today, Bank of England policymaker Gertjan Vlieghe spoke, saying that the central bank shouldn't cut its stimulus measures for at least several quarters. Additionally, the policymaker suggested that interest rates could sink to as low as -0.75% if the need arose and that there would be little tightening when the time came. Sterling softened after the speech. It's a quiet week for UK data, with only house price and mortgage stats worth noting.

Learning from mistakes 

The Euro traded in a tight range against the US Dollar last week but slipped enough to close the week slightly lower. The Euro softened after European Central Bank President Christine Lagarde stated that the central bank had learned from previous economic events and wouldn't be withdrawing its support measures too soon. Many central banks, including the ECB, have stated that even if they reach their inflation target, they won't necessarily take that as a cue to tighten their monetary policy stance. This week, Eurozone labour market data, as well as some German stats, will print. Any speeches by ECB members in the coming months will be watched closely for clues regarding the future of monetary policy.

Watching the Fed 

Last week, the US Dollar strengthened against a basket of currency majors, finishing the week 0.24% higher on a trade-weighted basis. Since the beginning of June, the US Dollar has risen by more than 4.0%. One of the main events in the week ahead will be the Federal Reserve gathering to discuss monetary policy. In August, the annual Jackson Hole Symposium will likely be a highly anticipated event, as investors look for guidance on interest rates. Comments from Fed Chair Jerome Powell on the topics of inflation and labour market could create some movement in the US Dollar. Additionally, this week, growth data will be out, as well as sentiment and inflation stats. 

Lowest levels since 2020

In trading last week, the Australian Dollar hit its lowest level since November 2020 versus the US Dollar in its fourth week of declines. It was a similar story in New Zealand, with the Kiwi tumbling to its softest number since November 2020. Last week, the Reserve Bank of Australia released its latest meeting minutes, which showed once again the central bank doesn't anticipate any interest rate hikes before 2024. In the week ahead, RBA Governor Guy Debelle will speak, followed by the release of Aussie inflation stats, which are expected to climb from 1.1% in Q1 to 3.8% in Q2. New Zealand data this week consists of ANZ Business Confidence and Building Permits stats. 

Ending the losing streak

Although softening on Friday, the Canadian Dollar noted an increase against the US Dollar last week—ending a recent losing streak of three weeks of consecutive declines and having reached its weakest level in five months against the US currency on Monday. Last week, the Bank of Canada took a largely optimistic approach to the economy and monetary policy, cutting its quantitative easing programme pace. The most influential day for Canadian data is likely to be Wednesday when inflation numbers are released. Expectations are for a drop on the year in June, from 3.6% to 3.2%. Additionally, Thursday will bring with it wage data, while Friday will see the publication of growth stats for May.