Looking at the economic rebounds
Brexit talks resume
The Pound largely traded sideways last week, but could move higher in the week ahead if comments from Bank of England Chief Economist Andy Haldane made over the weekend—regarding a quick economic rebound—are supported by data due out in the week ahead. UK growth was a big topic of discussion last week, after the second quarter of 2020 documented a disappointing -20.4% contraction—the biggest recession on record. This comes after an on average 0.51% growth per quarter since 1955, hitting record-highs of 5.0% in 1973. This is the first recession since the Global Financial Crisis in 2008, as the coronavirus sweeps the globe. Additionally, the UK saw its largest quarterly fall in employment in a decade in Q2, while wages also fell. This week, Brexit talks continue, and some key pieces of economic data will also be released, such as UK inflation, Consumer Confidence, Retail Sales, and manufacturing and service sector figures.
ECB meeting minutes ahead
The Euro is another currency that's been predominantly range-bound but reached above the 1.18 interbank level versus the US Dollar. This week economic data from the Eurozone is thin on the ground for most of the week, meaning Euro movement may be dictated by developments elsewhere and general risk sentiment. In terms of data, Eurozone inflation figures will be released, as well as the European Central Bank's latest meeting minutes. As the week comes to a close, manufacturing and services data will be revealed, which could influence the EUR exchange rate, especially as the data is expected to improve in August from July's readings.
Fed's Kaplan hints at lower rates for longer
US data last week posted some better-than-forecast results, but the US Dollar has also been trading sideways along with other currencies in what's been this month's market trend. Federal Reserve policymakers such as Robert Kaplan hasn't helped matters by suggesting that inflation should rise above the 2.0% target, which could keep interest rates lower for longer. Investors will be looking towards Wednesday's Federal Reserve monetary policy decision, and will be paying particular attention to any comments that reinforce Kaplan's view. Manufacturing and services data will also be out this week.
AUD and NZD
Looking at stimulus
Last week, the Pound hit the 2.0 interbank mark against the New Zealand Dollar for the first time since June, having advanced throughout the week. Recent speculation regarding the Reserve Bank of New Zealand suggests that the central bank could be ready to put looser measures of stimulus in place, such as a more significant quantitative easing programme and negative interest rates.
Last week, Reserve Bank of Australia Governor Philip Lowe said that the economic recovery in Australia would be delayed due to a second wave in Victoria, the country's largest state. Lowe commented: 'In our baseline scenario, we are expecting the Australian economy to contract by around 6% this year, and then grow by 5% next year and 4% in 2022.' In the week ahead, the RBA will release its latest meeting minutes, and investors will be keen to see any changes in language around fiscal stimulus or monetary policy, which could impact the Aussie's worth. If the central bank indicates that deeper levels of monetary support are needed, the Aussie's recent rally could stumble.
The Canadian Dollar softened against its US counterpart on Friday, despite stronger-than-forecast manufacturing stats, as risk sentiment wavered. The Loonie climbed over 1.0% versus the US Dollar and on Thursday had hit a six-and-a-half-month-high. In the week ahead, Canadian inflation data will be released, as well as the July New Housing Price Index, and Retail Sales stats. Additionally, speeches from Bank of Canada representatives will take place, which could influence the way the Canadian Dollar trades.