Pound hits 10-day low; politics drive markets

GBP – No-deal possibility keeps the pressure on Sterling

Last week, Boris Johnson kept a no-deal Brexit on the table should he be successful in taking the Prime Minister title, which pressured the Pound back below 1.27 against the US Dollar (GBP/USD). This morning, economic data has shown that UK factories have experienced their largest contraction in six years on account of Brexit uncertainty, which has driven the Pound to hit 10-day lows. Construction and service sector data will also be out this week—the services number will likely be in particular focus given it accounts for the largest portion of UK economic growth. However, it’s a relatively light week for UK economic data, meaning political developments will likely drive the majority of Sterling exchange rate movement. On Tuesday Bank of England (BoE) Governor Mark Carney will speak, but given that monetary policy is expected to remain on hold until the Brexit direction becomes clear, it’s unlikely any significant market movements will form following this event. 

EUR – Eurozone unemployment drops to lowest level since 2008

The Euro has come under pressure as the debate over who will become the next European Commission President weighs. Meanwhile, the European Central Bank (ECB) is still debating which tools to pull out of the box to use for its new round of stimulus. This week, Germany—the largest Eurozone economy—will be under the microscope with construction and Retail Sales data making their way onto the market, along with the Eurozone Retail Sales reading. This morning has revealed that Eurozone unemployment levels have fallen to 7.5% in May, the lowest reading since July 2008.

USD – Progress, or photo opportunity? 

Trump’s meeting and apparent Truce with Chinese Premier Xi over the weekend has raised some questions. Some have suggested that the meeting between the two leaders is little more than a photo opportunity, while others propose that tensions between the two nations could easily ramp up given their history. As geopolitical tensions appear to ebb, markets have favoured safe-haven currencies like the Japanese Yen and Swiss Franc less. This week a few pieces of high-tier US data could influence the US Dollar exchange rate, including today’s ISM Manufacturing and Employment numbers, and Friday’s Change in Non-Farm Payrolls and Unemployment Rate stats. 

AUD and NZD – Interest rates in focus

Last week, the Australian Dollar managed to register some gains against the US Dollar, on expectations that talks at the G-20 summit would see trade tensions ease, improving risk sentiment. Data has revealed that Australian manufacturing contracted and hit a three-year low in June as the broader economy slows, ending a 33-month streak of residing in expansionary territory. Tuesday will see the Reserve Bank of Australia (RBA) announce its next interest rate decision which could be a significant event for the Australian Dollar – especially if another cut were to occur. 
 
Meanwhile, it’s a quiet week for New Zealand economic data. The Kiwi Dollar has been advancing against its Aussie counterpart ahead of the RBA interest rate decision, but weak data out of the Trans-Tasman nations’ largest trading partner, China, have capped any significant movement. 

CAD – Canadian data boosts Loonie

The Canadian Dollar rose to near an eight-month high against the US Dollar (CAD/USD) last week as economic data fuelled hopes that the Bank of Canada (BoC) wouldn’t be in a rush to cut interest rates at its next meeting. This week, more high-tier data will be revealed, including the latest manufacturing readings and labour market data. Positive figures could boost the Loonie exchange rate further if markets believe the BoC will hold off on adjusting monetary policy.