Pound starts the week on the front foot; central bank developments in focus
Pound - GBP
BoE comments in focus
Last week, the Pound hit a two-year high against the Euro, and seven-month highs against the US Dollar as Brexit developments unfolded. Jeremy Corbyn backing a second referendum, the possibility of an extension to Article 50, and Theresa May laying out commitments for voting on her deal all helped to buoy the Pound. Sterling has begun this week on the front foot, despite economic data disappointing. The UK construction sector entered contraction in February, as Brexit uncertainty hit, and increases the chance the sector will enter recession in the first quarter. Tuesday will see service sector data reach markets, as well as comments from Bank of England (BoE) Governor Mark Carney as he testifies to the House of Lords.
Euro - EUR
Eurozone economic sentiment continues to slide
Economic sentiment in the Eurozone recorded its eight consecutive decline last week, but data showed that concerns over trade wars might be ebbing. This week, Tuesday will see the release of Italian growth data and Eurozone Retail Sales numbers which could offer the Euro some direction. Thursday will be one of the most interesting days for the Euro exchange rate when the European Central Bank (ECB) makes its latest interest rate decision. Comments from ECB Chief Mario Draghi will be under scrutiny for details as to where the central bank may go next in terms of its monetary policy.
US Dollar - USD
US labour market data in focus
The US Dollar recovered some ground on Friday afternoon, hitting a 10-week high against the Japanese Yen (USD/JPY), despite weaker-than-forecast economic data hitting the USD earlier in the day. The US currency rose on the prospect of a trade deal between the US and China. The most influential pieces of data out of the US this week will be Friday’s Change in Non-Farm Payrolls and Average Hourly Earnings stats. Higher earnings could help boost the US Dollar if investors expect there’s a more significant chance of an interest rate hike in the US later in the year.
Australian Dollar - AUD
Trade uncertainty hits Aussie
Trade uncertainty caused heavy AUD exchange rate losses in the middle of last week, which allowed the Pound to reach multi-month highs. Tuesday’s set to be an interesting day for the Aussie Dollar when the Reserve Bank of Australia (RBA) announces its latest interest rate decision followed by a speech by Governor Philip Lowe. Wednesday could be another eventful day when the latest Australian growth figures make their way onto the market.
New Zealand Dollar - NZD
Kiwi Dollar sensitive to geopolitical events
Last week showed New Zealand’s Terms of Trade drop by -3.0% quarter-on-quarter in the final three months of 2018. This marked the largest decline since 2015 and showed the impact of a reduction in export prices in the nation. It’s a quiet week in terms of New Zealand economic data, with only a few low-tier pieces due out. House Price data will be out on Tuesday, followed by Manufacturing Activity on Thursday—both are unlikely to offer the Kiwi Dollar too much direction, leaving the currency to fluctuate on geopolitical events.
Canadian Dollar - CAD
Canadian growth disappoints
The Pound reached a six-month high against the Canadian Dollar last week as no-deal Brexit risks eased. Friday showed some disappointing numbers from the Canadian economy. Growth fell from 1.70% to 1.10% on the year in December. Meanwhile, the manufacturing sector also noted a slight fall in productivity. The Canadian Dollar could be another currency to feel the impact of central bank developments this week, with the Bank of Canada (BoC) due to make its latest interest rate decision on Wednesday. Friday is another day which could see CAD exchange rate fluctuations when the most recent Unemployment Rate and wage data come to light.