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No-deal Brexit back in focus

Pound - GBP

UK politics get rockier

The Pound reached fresh four-month lows last week as the UK political landscape became rockier. Theresa May laid out her plans to resign, and the Conservative Party leadership race began, leaving the UK in both Brexit and leadership uncertainty; the Pound dropped on the news as a no-deal Brexit came back into focus. Meanwhile, European elections showed Nigel Farage’s Brexit Party won the majority of seats, as the Conservatives and Labour experienced significant losses. There are several pieces of medium-tier UK data out in the week ahead, but a lot of Sterling’s movement is likely to be determined by UK political developments. A rise in the UK’s Consumer Confidence levels this week might offer the Pound some opportunity to gain. 

Euro - EUR

Is Italy out of recession?

The Euro has been softening against the US Dollar in recent sessions, approaching two-year lows. Last week’s European Central Bank (ECB) meeting minutes highlighted that policymakers were concerned over the currency bloc’s economic recovery, which served to push the Euro exchange rate lower. European elections showed that pro-EU parties managed to retain a lot of their popularity. German data will be in focus this week, with labour market data out on Wednesday and inflation figures out on Friday. The final Italian growth numbers for Q1 will also be out, and investors will be interested to see whether the economy has emerged from recession. 

US Dollar - USD

The Fed's next step

The prospect of an interest rate cut by the US Federal Reserve has put a dampener on the US Dollar recently. Given ongoing trade tensions with China and the potential for a long wait for a resolution, the economy could suffer and force the Fed’s hand to create a more accommodating line for monetary policy. There are a few high-tier pieces of US data due out in the week ahead, and these figures will be under scrutiny as markets attempt to predict when the US Federal Reserve might need to take action on interest rates. Thursday will see the annual growth figure released, a dip here or on any of the other leading indicators could put some pressure on the US Dollar. 

Australian Dollar - AUD

Aussie Dollar sinks

The Reserve Bank of Australia (RBA) Governor Philip Lowe suggested last week that an interest rate cut could be imminently on the horizon. As a result, the Australian Dollar to US Dollar (AUD/USD) exchange rate hit a five-month low. There are a few pieces of economic data due out in the week ahead such as Building Approvals, but a lot of the Aussie’s movement is likely to depend on risk appetite and geopolitical developments. 

New Zealand Dollar - NZD

RBNZ in focus

The New Zealand Dollar also experienced some weakness last week. New Zealand’s latest Retail Sales data disappointed and pressured the Kiwi Dollar lower. Ongoing trade tensions between Australia and New Zealand’s largest trading partner, China, and the US are also weighing on the Aussie and Kiwi Dollars. This week, comments from the Reserve Bank of New Zealand (RBNZ) will be in focus, especially if interest rates are mentioned. The central bank will release its financial stability report on Tuesday, and Governor Adrian Orr will be at the Parliament Select Committee on Wednesday. 

Canadian Dollar - CAD

Loonie strengthens on oil 

The Canadian Dollar was able to strengthen last week, tracking oil gains. As oil is Canada’s most lucrative export, changes in its value can impact the way the Canadian Dollar trades. However, this week, the Bank of Canada’s (BOC) interest rate decision will be in focus. Policymakers are expected to keep rates on hold after recently pausing a rate hike cycle. However, investors will be looking for any hints about the central bank’s future policy path. Meanwhile, Canadian growth numbers released on Friday could also impact the Loonie. Forecasts suggest an upswing in growth, which could offer the CAD exchange rate an opportunity to climb.