Pound hits six-week high, UK growth surprises, Parliament faces suspension

GBP – Sterling jumps as UK growth beats forecasts

The Pound experienced some interesting movement last week; while Monday saw the British currency dip to its lowest level against the US Dollar since 2016, Sterling then recovered by around 3.3% as risks of a no-deal ebbed. On Friday the Pound began to retrace some of its gains against the US Dollar as Brexit uncertainty prevailed. Boris Johnson could face another major setback in Parliament today when a bill to block a no-deal exit is expected to receive royal assent. The bill states that if there’s no deal in place with Brussels by the current October 31st deadline, the government would be forced to ask for an extension until at least January 2020. Over the weekend, Amber Rudd quit in protest of Johnson’s leadership, and this morning the Prime Minister has announced his plans to suspend Parliament from today for a month; political headlines will likely continue to dominate Sterling sentiment. The Pound has begun the week on the front foot achieving six-week highs versus the Euro and US Dollar while climbing across the board; data released this morning showed that the UK economy grew by 0.3% in July, much better than forecasts for only 0.1% expansion. UK labour market data will be released on Tuesday.

EUR – Waiting for the ECB 

In the past month, Sterling, at its strongest levels has gained by around 4.0% against the Euro, and the US Dollar has reached two-year highs against the common currency. Weighing on the Euro has been weaker economic data and expectations for a big stimulus package from the European Central Bank this week. One of the most influential events in the week ahead for the Euro will likely be the ECB’s monetary policy meeting on Thursday. Markets currently anticipate an interest rate cut by the bank, with the return of quantitative easing to bolster the currency bloc’s economic situation. Final German inflation data for August and July’s Eurozone Industrial Production numbers will be out on Thursday morning.

USD – The impact of trade wars

Last week, the latest US labour market data showed fewer jobs were added than expected in August. While President Donald Trump is busy blaming the Federal Reserve for not cutting rates further, there are concerns in the market that the  US-China trade war will have an impact on the labour market, but so far, data has remained mostly upbeat. This week, markets will be looking towards the US inflation reading on Thursday, and retail numbers and sentiment readings on Friday.

AUD and NZD – An upswing in risk sentiment  

Last week, news that the US and China would continue trade talks took some pressure off the Australian and New Zealand Dollars. The Aussie hovered near one-month highs against the US Dollar, while the New Zealand Dollar retained some of its recent strength as risk sentiment improved.
 
This morning, the Pound is trading around 0.50% higher against the Australian and New Zealand Dollars. Australian Business Confidence data will be out on Tuesday, followed by Consumer Confidence on Wednesday and Inflation Expectations on Thursday—all of which are moderately influential and may have an impact on the Aussie exchange rate. Meanwhile, New Zealand Manufacturing data will be out on Thursday, which could influence the Kiwi Dollar.

CAD – Near five-week highs

Last week, the Canadian Dollar climbed against the US Dollar after the Bank of Canada’s interest rate decision to leave rates unchanged at 1.75%. As the week progressed, the CAD/USD exchange rate hovered near five-week highs after US labour data missed forecasts and Canadian data impressed. Figures showing 81.1K people went into employment in Canada in August surprised markets after predictions for a much smaller 20.0K. There are a few pieces of data out in the week ahead, which may offer some moderate movement to the Canadian Dollar exchange rate.