The Pound regained some of its strength last week—climbing to levels of 1.30 versus the US Dollar and 1.15 against the Euro in Friday's session—after soon-to-be Bank of England Governor Andrew Bailey quashed rumours of an imminent interest rate cut. Bailey is due to take the helm of the BoE when Mark Carney leaves this month, having extended his term to offer the bank some stability during periods of Brexit uncertainty. Markets seemed to be reassured by Bailey's apparent steady hand. Still, with central banks across the world cutting interest rates to offset the economic impact of the coronavirus spread, it might only be a matter of time before the BoE takes action. This week, the spotlight will be on the UK's Construction Output, Industrial Production, and Manufacturing Production figures for January, released on Wednesday. Additionally, monthly growth numbers for January will be revealed, which could impact the GBP exchange rate.
The Euro has been strengthening of late, climbing by around 5.0% versus the US Dollar in recent weeks as the Buck weakens across the board. As central banks around the world start to lower interest rates, eyes will be turning to this week's European Central Bank interest rate decision on Thursday. Rates already remain in negative territory at -0.50%, giving policymakers less wiggle room than many other central banks. However, with another rate cut likely to have a more limited impact, ECB policymakers may have to look at other stimulus measures to support the economy amid the coronavirus outbreak.
The US Dollar has experienced some broad-based weakness in recent sessions, and last week, central bank developments served to put the Buck under more pressure. The Federal Reserve announced its single biggest interest rate cut in more than ten years. The last time such a move was made, the world was in the depths of the 2008 Global Financial Crisis. The move came to try and offset the effect of the coronavirus, with some economists forecasting further rate cuts in coming months. The US Dollar hit a five-month low versus the Japanese Yen, and while US Change in Non-Farm Payrolls data for February showed a 273K increase—far higher than the 175K forecast—the US Dollar struggled in the market. This week, inflation data will be revealed, which could be another significant event for the USD exchange rate.
The Australian Dollar recouped some losses last week, after hitting 11-year lows the week before, but both Trans-Tasman currencies remain sensitive to any changes in risk sentiment. Weaker Australian Retail Sales data also added pressure to the Aussie Dollar towards the end of the week—a factor attributed to bushfires which kept people inside. The New Zealand Dollar also noted some gains versus the US Dollar last week, but both Trans-Tasman currencies weakened against the strengthening Euro. In the week ahead, Australian Consumer and Business confidence data points will be released, as well as the March inflation reading. There are only a few medium-tier New Zealand stats out, including House Sales and Manufacturing Purchasing Managers' Index data, meaning NZD influence could come from other geopolitical factors.
The Canadian Dollar fell against the US Dollar last week after the Bank of Canada announced its most significant interest rate cut in more than ten years, while also signalling it was prepared to take further action on account of the coronavirus. Labour market data showed an increase in wages and job growth, but the unemployment rate also noted an increase. Meanwhile, oil prices continued to decline, putting pressure on the Loonie exchange rate. In the week ahead, some medium-tier data will be released, including Housing Starts, Building Permits, and Existing Home Sales. However, a lot of Canadian Dollar movement is likely to come from risk sentiment and oil prices.