Brexit vote postponed, again
Overall, the Pound exchange rate made gains last week on optimism that a solution to the Irish border backstop could be reached. The Pound has begun this week trending above 1.30 against the US Dollar and 1.15 against the Euro, despite the prospect of political uncertainty in the week ahead. Theresa May’s decision to postpone the vote on her Brexit deal until March—just weeks before the 29th Brexit day deadline—suggests that conversations between the two sides still need more work, and parliament could potentially wrest control of Brexit from the government. This would likely result in delaying the official Brexit day and create more political uncertainty, leaving the Pound volatile. Central bank comments in the week ahead could also impact Sterling.
Eurozone economy close to stagnation
Data out of the Eurozone last week did little to boost confidence in the currency bloc’s economic activity. Economist Chris Williamson said: ‘The Eurozone economy remained close to stagnation in February. The flash PMI lifted only slightly higher during the month, continuing to indicate one of the weakest rates of expansion since 2014.’ The numbers emphasised a global slowdown and increased concerns that the European Central Bank (ECB) may look to intervene with stimulus measures in the near future. Friday’s economic data is likely to give the Euro exchange rate some direction. The latest German and Eurozone unemployment numbers will be out, as well as the Eurozone’s inflation reading.
Trump's trade talks in focus
Last week, the Federal Reserve’s meeting minutes suggested the central bank would look to data to decide on the future path of monetary policy. Therefore, the US Dollar is likely to be sensitive to future data publications. Meanwhile, US President Donald Trump’s decision to back down on the March 1st tariff deadline for Chinese goods has increased risk appetite in financial markets, putting pressure on the safe-haven US Dollar. While Trump seemed optimistic, Chinese news headlines are less buoyant on the situation, suggesting there could still be a long way to go. In terms of economic data, Tuesday’s consumer confidence number could create some USD movement, as could comments by Federal Reserve Chief Jerome Powell throughout the week. Thursday will see the release of US growth numbers. President Trump is also due to meet Kim Jong-un this week and developments there could also offer the US Dollar exchange rate some direction.
Aussie fluctuates on trade
Trade developments between the US and Australia caused the Aussie Dollar to weaken last week on reports that Australian coal imports had been banned indefinitely. However, the Aussie has recovered somewhat and comments by the Reserve Bank of Australia (RBA) Governor that interest rate rises may be needed next year have helped to bolster the currency. Thursday will bring with it manufacturing data which may influence the Aussie.
Kiwi Retail Sales numbers rebound
Last week, the New Zealand Dollar found itself weighed down by its Aussie counterpart; however, the Trans-Tasman currencies were granted some stability when the Australian Prime Minister said that the developments didn’t indicate souring ties between the two nations and their biggest trading partner. Overnight, New Zealand Retail Sales data has shown a promising rebound in the fourth quarter. The Q4 figure came in at 1.70%, up from a positively revised 0.03% and the 0.50% forecast. New Zealand Trade Balance data will be out on Tuesday, followed by Building Permits and the ANZ Activity Outlook on Thursday.
Canadian inflation and growth numbers ahead
The Canadian Dollar strengthened last week, reaching its highest level in over two weeks against the US Dollar after US-China trade deal hopes rose. Despite Canadian retail sales showing an unexpected fall, the Canadian currency posted gains, finding some additional support from stronger oil prices. Wednesday will see the release of the January inflation reading, while Friday will bring with it growth and manufacturing numbers.