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Softening on sentiment

Under fire

Weaker-than-expected US data allowed the Pound to US Dollar exchange rate to climb to an interbank high of 1.3892 last week and close higher for the second consecutive week. However, the British currency remained in a tight range versus the Euro last week. There isn't a large amount of highly influential UK data due for release in the coming sessions, giving more opportunity for attention to turn to politics. Boris Johnson is coming under fire for plans to hike national insurance by members of his own party. In terms of data, the Office for National Statistics will release its growth figures at the end of the week, while the Bank of England will also conduct its quarterly monetary policy report hearings regarding inflation and economic outlook.

ECB policy statement ahead

The Pound to Euro exchange rate touched six-week lows during last week's trading but closed the week flat. Meanwhile, the selloff in the US Dollar allowed the Euro to gain 0.75% against the Buck by the close of the week. However, it wasn't all good news in the Eurozone, with both retail and service sector numbers coming in below expectations. This week's main event will be the European Central Bank's monetary policy statement and press conference on Thursday. Given recent inflation surges, the central bank is expected to change its stance; European policymakers have been more cautious than US and UK central bankers, but this week could see a change.

Softening on sentiment

The Pound reached three-week highs versus the US Dollar last week, closing the week 0.87% higher. The Stateside currency has continued to soften as risk sentiment improves and US data falls below expectations. The highly influential US Non-Farm Payrolls reading came in at only 235K in August, despite forecasts for a much larger 720K reading. The Delta Coronavirus variant is hindering economic activity in the US, and the weaker US jobs figure is a blow to the Biden Administration, which has already felt the heat from criticisms over the handling of the Afghanistan withdrawal. Additionally, President Biden will be considering who to appoint as the head of the Federal Reserve and whether to re-nominate Jerome Powell.

RBA rate decision in focus

The Sterling to Australian Dollar exchange rate reached eight-week lows last week and closed 1.26% softer. Meanwhile, the Pound to New Zealand Dollar exchange rate hit its weakest level since May 2021, closing 1.26% lower. One of the most interesting events this week could be the Reserve Bank of Australia's interest rate decision. Although the interest rate is expected to remain on hold at current levels, markets will closely watch for any language change. Australian Building Permits and Consumer Inflation Expectations stats are also worth noting this week, while New Zealand has a much quieter economic calendar with only card spending stats of note.

Labour market data ahead

The Pound traded in a tight range against the Canadian Dollar last week, closing the week flat. This week, the Bank of Canada will announce its latest interest rate decision with forecasts expecting policymakers to keep it on hold at 0.25%. BoC Governor Tiff Macklem will also speak this week, ahead of highly influential labour market data released at the end of the week, meaning there could be plenty of opportunity for CAD exchange rate movement.