Last week, the Pound gained on optimism that Brexit talks could make some progress and trade negotiations would continue throughout the summer. The UK’s Chief Brexit negotiator David Frost said that he was committed to arranging meetings with the European Commission to push past obstacles. However, despite the recent GBP rally, there are still the economic impacts of Brexit and the coronavirus which could hinder the Pound as data prints in the coming months. This week, the UK’s highly influential Gross Domestic Product growth numbers will be released, and are expected to show a decline from -5.7% to -22.3% on the year. Additionally, Manufacturing Production, Industrial Production, and Construction Output stats will also be released.
The Euro strengthened last week, hitting a three-month high versus the US Dollar after the European Central Bank announced it was expanding its stimulus to help the currency bloc cope with the worst recession since World War II. The news encouraged gains for other riskier currencies such as the Aussie and Kiwi Dollars, and Pound. Today, European Central Bank Chief Christine Lagarde will speak, which could influence the Euro. In the rest of the week, Eurozone growth rate data will be released, followed by a Eurogroup video conference, and Industrial Production stats as the week progresses.
One of the main events last week was the release of US labour market data. After a massive 20 million drop in jobs in April, May showed the addition of 2.5 million positions, which helped trigger an improvement in the Unemployment Rate. While in February unemployment sat at only 3.5%, April registered a jump to 14.7%; May’s addition of jobs brought that level down to 13.3%. Despite the improvement, the safe-haven Dollar slipped against a basket of other majors at the close of last week and begins this week on the back foot as economies around the world continue to recover from the impact of the coronavirus. This week, US inflation data will be released as well as the Federal Open Market Committee’s economic projections and interest rate decision.
Both the Aussie and Kiwi Dollars rose to their strongest levels since January last week after data from China, Australia and New Zealand's largest trading partner, printed positively. The Australian Dollar resided near six-month highs versus the US Dollar last week as risk-on attitudes swept the market. With the global economy attempting to return to some normality after lockdowns in many countries, sentiment in riskier assets has increased. Furthermore, the Reserve Bank of Australia has pushed back on the idea of cutting interest rates into the negative. The Australian economy revealed it was in recession last week for the first time in 29 years after the bushfires and coronavirus took their toll on the economy.
In the week ahead, Australia’s Westpac Consumer Confidence Index will be released, as well as a selection of housing market stats, and Consumer Inflation Expectations data. Meanwhile, New Zealand will see the release of Electronic Retail Card Spending numbers, as well as the latest Business NZ and Services NZ Purchasing Managers’ Indexes. Any changes to risk sentiment could also influence the Trans-Tasman currencies.
The Canadian Dollar strengthened to near three-month highs on Friday following the release of labour market data. Unemployment rose by a small amount from 13.0% to 13.7%, rather than the 15.0% forecast. Meanwhile, Employment Change data surprised to the upside, showing the nation added 289.6K jobs in May, after April’s record-breaking near 2M job losses. Global oil prices rose to hit three-month highs on Friday, reaching above $40 a barrel. The move higher came after the Organisation of the Petroleum Exporting Countries agreed to continue holding back production of oil. It’s a quiet week ahead for Canadian data with only a few low-tier stats due for release, leaving the Canadian Dollar sensitive to global developments and commodity price changes.