Last week, Sterling came under pressure when the Bank of England chose to keep interest rates on hold, but not unanimously. This was the first split vote since June 2018, with two members of the Monetary Policy Committee voting for a rate cut. While the central bank suggested the short-term outlook has improved as the risk of a no-deal exit from the EU subsides, the bank downgraded growth forecasts for the next several years. UK growth numbers noted a fall today and registered the slowest annual growth rate since 2010. UK expansion tumbled from 1.3% on the year in the second quarter, to 1.0% in the third. Despite domestic data taking a back seat to political developments, there are quite a few influential figures due out this week which could cause some Sterling fluctuations. Labour market data will be out in Tuesday's session, followed by inflation figures on Wednesday.
Weaker Eurozone data has weighed on the Euro in recent weeks, as well as the bloc's negative interest rates, leaving the common currency mainly susceptible to events elsewhere. Dollar strength has largely dictated EUR/USD movements, and the pair hit a new three-week low on Friday. EUR/USD has been sitting in the region of 1.10 this morning and around 0.85 against the Pound. This week will shed some light on economic sentiment in the Eurozone, as well as growth numbers in both Germany and the Eurozone as a whole, which could allow the Euro opportunity to move.
The US Dollar appreciated last week as US-China developments continued, and the Buck reached multi-week highs this morning on optimism the trade spat could soon be over. In terms of economic developments this week, inflation and retail sales numbers will be the main events, but there are other medium-tier stats which could move markets too. One of the other significant events will be speeches by Federal Reserve Chief, Jerome Powell, and other central bank members which could offer the US Dollar some direction.
News regarding the US-China trade war created some erratic movement in the Aussie Dollar last week as headlines made their way onto the market. Additionally, the Reserve Bank of Australia indicated that further rate cuts could occur next year when growth and inflation forecasts were cut. The New Zealand Dollar also slipped last week as investors ramped up expectations for a cut by the country's central bank. The Reserve Bank of New Zealand will announce its latest interest rate decision on Wednesday which may put some pressure on the Kiwi and create market movement, especially if a decrease in rates from 1.00% to 0.75% occurs as forecast. Meanwhile, Thursday could be an interesting day for Australian Dollar fluctuations when highly influential labour market data is released.
The Canadian Dollar hit a three-week low against the US Dollar last week as labour market data disappointed, and increased expectations for another Bank of Canada rate cut in the near future. Canada exports a significant amount of oil, so a prolonged trade war between the US and China won't help the economy. There are a few medium-tier ecostats out this week for the Canadian Dollar, but one of the most highly anticipated events will be speeches by Bank of Canada Governor Stephen Poloz.