Last week, the Pound achieved one-month highs before political developments created volatility; Boris Johnson announced plans to suspend Parliament, while opposition leaders suggested they would take steps to prevent his ‘smash and grab on democracy’. Protests against shutting down Parliament took place in some of the UK’s major cities at the weekend including London, Leeds, and Oxford. Last night, Johnson escalated hostilities further by saying rebel Tories could face deselection. This week, more political events could create market movement as Parliament resumes following a summer recess. On Tuesday, Johnson will give a statement about the recent G-7 summit in France. Michael Gove will also update Parliament regarding the plans in place should the UK leave the EU without a deal. After the speeches, politicians against a no-deal exit could try and introduce legislation which would block a disorderly Brexit—dependent on how this goes, there could be more debates throughout the week and further volatility for Sterling. Manufacturing, construction, and services data will also be out this week, as well as the Bank of England’s 12-month inflation forecast, all of which could impact the Pound. Last week confirmed the UK had dropped to the bottom of the G-7 growth table after Brexit uncertainty hindered expansion and the economy contracted 0.2% in the second quarter.
The Euro tumbled by around 0.8% on Friday against the US Dollar to reach its weakest level since May 2017 as the Dollar strengthened and political developments in Italy hindered the common currency. Meanwhile, German data showed the weakest business confidence reading in nearly seven years, which put pressure on the Euro exchange rate. It’s not an overly busy week for Eurozone data, which could leave the common currency to fluctuate on other developments elsewhere. However, Eurozone Retail Sales will be out on Wednesday, followed by German Factory Orders and Construction data on Thursday, and the final Q2 Eurozone growth numbers on Friday.
The Dollar strengthened against other currency majors on Friday as markets awaited new tariffs. As concerns surrounding global growth continue to circulate, the US Dollar could remain popular. Also supporting the Dollar last week was economic data showing an increase in consumer spending in July. Trump’s new tariffs on Chinese goods totalling $110B came into action on Sunday, and China introduced tit for tat tariffs on $75B of US goods. However, the two nations are expected to meet in Washington in September for further trade negotiations. It’s a busy week for US data, and Friday is likely to be one of the key days for developments. The US Change in Non-Farm Payrolls and Unemployment Rate stats will detail the health of the labour market—an event which could be influential for the US Dollar if markets think it could impact the Federal Reserve’s monetary policy path.
The Australian and New Zealand Dollars shifted lower against the US Dollar last week after domestic data from the Oceanic nations disappointed and global growth concerns lingered. The New Zealand Dollar dropped below the 63 US cent mark last week for the first time in almost four years—the last time it reached these levels was September 2015.
On Tuesday, the Reserve Bank of Australia (RBA) will meet to discuss monetary policy which could be influential for the Aussie Dollar, and by proxy, the New Zealand Dollar too. On Wednesday, the latest Australian growth readings for quarter two will also be released. It’s a quiet week for New Zealand data, but scheduled dairy auctions will put values on the nation’s biggest commodity and could impact the Kiwi Dollar.
Last week, the Canadian Dollar softened against the US Dollar as oil prices declined and the Buck strengthened across the board. The Canadian Dollar had been offered some support earlier in the week when the Canadian economy had registered annualised growth of 3.7% in the second quarter—0.9% quarter-on-quarter—as exports strengthened. There are a few big pieces of economic data due out in the week ahead, such as manufacturing stats on Tuesday and labour market data on Friday. Additionally, the Bank of Canada will make its latest interest rate announcement on Wednesday.