Last week, the Pound came under pressure while a lack of Brexit developments took place, trading at levels not seen since February against the US Dollar. However, this week, Sterling’s begun the week on the front foot, recovering some recent losses against the US Dollar and Euro. UK local elections may be a source of Pound movement in the days ahead, as well as the prospect of a downgrade to British growth forecasts. Bank of England (BoE) Governor Mark Carney will speak a few times this week, and Thursday’s comments after the central bank’s interest rate decision will be in focus. However, with the hunt for a new Governor taking place and the ongoing Brexit uncertainty, it’s unlikely the central bank will take any drastic action in the near future.
The Euro hit a 22-month low versus the US Dollar last week as Eurozone data continued to be weak, in contrast to some strong figures from the US. There are a number of high-tier ecostats due out in the week ahead which could impact the Euro exchange rate, such as German labour data, Eurozone growth numbers, and Eurozone inflation readings.
The US Dollar had some opportunity to strengthen last week, but all eyes will be focused on Wednesday’s central bank meeting. The Federal Reserve will announce its latest interest rate decision, followed by a press conference with Fed Chief Jerome Powell whose comments could be very influential for the US Dollar. Another important day for USD strength will be Friday when the latest US Non-Farm Payrolls stat emerges—this piece of data highlights the strength of the labour market and has been known to move markets significantly. Eyes will also be on the continuing trade talks between the US and China.
Weak inflation data from Australia last week increased speculation that the Reserve Bank of Australia (RBA) may make an interest cut in the near future and pressured the AUD exchange rate to six-week lows. There are a few moderately important data points out in the week ahead which may offer the Aussie Dollar some opportunity to move. Tuesday will detail April’s manufacturing sector performance, while Thursday’s data will take a look at how the economy’s service sector has been performing. Friday closes the week with Building Approvals stats.
Earlier in the month, the New Zealand Dollar had softened when weak inflation data came to light, signalling the possibility of an interest rate cut. News that Australian inflation had also disappointed last week and could result in a downward adjustment to interest rates weighed on the Kiwi Dollar too. Tuesday could be an interesting day for the New Zealand Dollar when the latest labour market data is released. The New Zealand Unemployment Rate reading is expected to slip from 4.3% to 4.2% in the first quarter.
There are a few key pieces of Canadian economic data due out in the week ahead which could influence the CAD exchange rate. Tuesday will see Canadian growth numbers emerge, which are expected to have flatlined in February at 0.0%, and indicate a decline from 1.6% to 1.4% on the year—a development unlikely to offer the Canadian Dollar any support. Meanwhile, manufacturing data for April will be out on Wednesday; March’s reading sat just in expansion territory, so any decline into contraction could also put pressure on the Canadian Dollar.