Pound Index falls 5.0% since May
GBP – Pound struggles under Brexit weight
The Pound struggled near two-week lows against the US Dollar last week, dropping to below the 1.25 interbank level as robust US data caused the USD to rally. Meanwhile, Brexit also weighed on the British currency with the Conservative leadership contest in full swing, rumours of a no-deal exit had been weighing on Sterling. However, that possibility seems to be ebbing, and the Pound may have some room to recover somewhat but is expected to remain range-bound until British politics have some direction; the new Tory Prime Minister is announced towards the end of the month. The Pound Index has lost more than 5.0% of its value since the start of May, 2.0% of which has occurred since Theresa May resigned. Wednesday might be the most exciting day for economic data this week, with a slew of ecostats due to reach the market. Growth figures, along with construction, manufacturing, services, and industrial numbers will emerge and could be moderately influential for Sterling.
EUR – Eurozone data disappoints
The Eurozone produced some disappointing figures last week, so much so, that ING called it ‘devastating’. Eurozone Retail Sales took a sharp decline, while German Factory Orders tumbled. A downturn in economic data puts more pressure on the European Central Bank (ECB) to begin supporting the economy with further stimulus—something that could be damaging for the Euro in the long-term. This week, Thursday will see the European Central Bank’s meeting minutes from the recent policy meeting published, which could offer some Euro movement, while Friday will reveal the latest industrial data for the currency bloc.
USD – US jobs data allows Buck to surge
Last Friday, the US Dollar soared as the latest labour market data came in above expectations, calming any near-term recession fears. The figures led markets to believe that the US Federal Reserve may not move to cut interest rates by as much, or as quickly as first thought. However, the global growth backdrop isn’t very accommodating, and with easing happening at central banks around the world, a rate cut could still occur this month, something that would likely pressure the US Dollar lower. There are a few events this week which could impact the US Dollar’s value, including the release of the Fed’s meeting minutes from its recent policy meeting on Wednesday. Additionally, Fed Chief Powell will testify both Wednesday and Thursday, and inflation data will reach markets on Thursday.
AUD and NZD – Rate forecasts weigh
At the start of the week, the Reserve Bank of Australia (RBA) cut interest rates to record lows of 1.0%, following concerns about the economy and the impact of US-China trade tensions. There are a few moderately influential data points out this week, which could create Australian Dollar movement, such as confidence figures on Tuesday and Wednesday, and inflation expectations on Thursday.
The Pound sank to near six-month lows against the New Zealand Dollar in the early part of last week but managed to recover some losses as the week went on. Concerns that the Reserve Bank of New Zealand (RBNZ) might need to follow in the RBA’s footsteps and cut rates at a quicker pace weighed on the Kiwi Dollar. Meanwhile, the New Zealand Dollar could experience some movement on Wednesday when Reserve Bank of New Zealand Governor Adrian Orr speaks.
CAD – Jobs surprise causes Loonie retreat
Last week, the Canadian Dollar retreated from eight-month highs against the US Dollar as the US currency rallied on strong jobs data. In comparison, the Canadian Net Change in Employment stat showed a decline of -2.2k, in June, while unemployment edged higher from 5.4% to 5.5%. Economists had expected 10.0K jobs to be added to the economy, rather than a shedding of positions. The Canadian Dollar might experience some movement this week when the Bank of Canada (BoC) announces its latest interest rate decision on Wednesday. Economists forecast the central bank will keep rates on hold at 1.75%, which should offer some support to the Loonie, but any surprise cuts could cause losses for the CAD exchange rate.