After spending most of the summer softening against other currency majors, the Pound broke through the 1.21 resistance barrier against the US Dollar last week after UK Retail Sales showed a surprising upswing. British politics continued to be volatile last week when Jeremy Corbyn urged other party leaders to support his vote of no confidence to put him in place as temporary Prime Minister to delay Brexit and hold a general election. It’s a relatively quiet week ahead for UK economic data, leaving the Pound to fluctuate on developments elsewhere and any political news.
The Euro softened last week in response to comments by European Central Bank member Olli Rehn who emphasised the importance of heavy stimulus measures, which markets took as an indication of things to come in the upcoming September policy meeting. In the week ahead, Thursday could be an interesting day given the slew of Eurozone and German manufacturing, services, and confidence data due to emerge. This morning has seen the final Eurozone inflation readings for July released which have come in lower than many economists had predicted, falling from 1.3% to 1.0% on the year. This could place more pressure on the European Central Bank to introduce more stimulus measures to help the weakening economy - markets expect some kind of development on September 12th when policymakers meet.
Concerns about the US-China trade relationship and slowdowns in some of the world’s most significant economies as recession signals flare-up have caused a rise in safe-haven assets of late. Currencies like the Japanese Yen, Swiss Franc, and US Dollar have gained popularity as a result. The Federal Reserve’s latest policy meeting minutes will be out on Wednesday, which could cause some market movement as monetary policy is a hot topic in the market at the moment. Any signs of further easing in the months to come might put some pressure on the Buck. The annual gathering of central bankers at Jackson Hole begins on August 22nd, and markets will be listening closely to comments from Chiefs to try and predict what could happen next in monetary policy. This annual symposium hosted by the Kansas Federal Reserve has caused market movement in the past.
The Australian Dollar climbed at the start of last week following healthy jobs gains; however, both the Aussie and Kiwi Dollars have been sensitive to the mounting global growth concerns.
This morning, the Pound has been climbing against both the Australian and New Zealand Dollars. Tuesday could see more Sterling gains if the August Reserve Bank of Australia meeting minutes strike a dovish tone. A selection of Australian and New Zealand moderately influential data will be out on Wednesday, which may also impact the Oceanic currencies. RBA Governor Philip Lowe will give a speech at Jackson Hole on Saturday.
The Canadian Dollar hovered near eight-day lows towards the end of last week as concerns about the global economic outlook shrouded the market. Wednesday could see the Canadian Dollar under pressure if the latest Canadian inflation reading falls in line with forecasts. Economists have predicted the annual July reading will fall from 2.0% to 1.7%. A reading like this could also heighten speculation about the Bank of Canada’s next interest rate decision.