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Sterling rally falters on politics and disappointing data

GBP – Head-to-head

Last week, UK politics were in sharp focus when it came to the Pound as the battle of the parties continued. The first head-to-head between Labour leader Jeremy Corbyn and Prime Minister Boris Johnson took place, with viewers surprised at Corbyn’s performance. Polls taken immediately after suggested there was no clear winner—PM Johnson scored 51% while Corbyn scored 49%. However, another debate was scheduled for Sunday on Channel 4, until reports suggested Johnson had refused to take part. After the revelation, Channel 4 News anchor Krishnan Guru-Murthy commented: ‘Boris Johnson said he was in favour of debates and his team have been in detailed talks with us for weeks about format and rules right up until yesterday. They insisted they were engaged and wanted to take on Jeremy Corbyn on our channel. Corbyn said yes. Offer still stands.’ The Pound might be the best performing G10 currency in the last six months, but last week the British currency’s rally lost a bit of steam at times. The possibility of a hung parliament and disappointing UK data created Sterling weakness—the GBP exchange rate will be sensitive to polls and headlines released in the lead up to the 12th December general election. It’s a quiet week ahead for British data, meaning the Pound could be particularly susceptible to political and geopolitical developments.

EUR - Germany in the spotlight

The Euro was pressured lower against the US Dollar last week after disappointing Eurozone data came to light, touching weekly lows. The Euro was little moved by new European Central Bank Chief Christine Lagarde’s first monetary policy speech, but markets will be paying close attention to her comments going forward in case they indicate a change in policy direction. In the week ahead, both high-tier German and Eurozone inflation data will be out, as well as German labour market data, all of which could influence the Euro exchange rate. There are other medium-tier ecostats scheduled too, detailing the performance of other areas of the German economy, such as Retail Sales, and Consumer Confidence.

USD - Mixed messages

It was a week of mixed messages from the US and China, and by the end of last week, the US Dollar was treading water following a barrage of headlines, yet it still appeared little progress had been made. However, upbeat manufacturing and services sector data gave the US Dollar some small opportunity to move. This week, there are a few highly influential ecostats out for release, including growth numbers on Wednesday. While a positive upswing in growth could bode well for the Buck, any print below forecasts could create Dollar softness.

AUD and NZD - Susceptible to global developments 

Both the Aussie and Kiwi Dollars were susceptible to fluctuations last week on news from the US and China, as China is Australia and New Zealand’s largest trading partner. Both Trans-Tasman currencies are sensitive to risk appetite, and should a resolution between the two superpowers be found, the Oceanic currencies could enjoy a boost.

Tuesday will be an interesting day from a central bank perspective. Reserve Bank of Australia Governor Philip Lower is expected to give a speech on Tuesday, and the Reserve Bank of New Zealand will publish its Financial Stability Report. Later in the week, the New Zealand Government will release its four-month financial statements. There are a few more Kiwi data releases scattered throughout the week, but it’s relatively quiet for Aussie data, meaning the AUD exchange rate will be susceptible to global developments and risk sentiment.

CAD - Yo-yoing on BoC comments

Towards the end of last week, the Canadian Dollar was able to strengthen against the US Dollar after previously hitting a six-week low. The CAD exchange rate rebounded after Bank of Canada Governor Stephen Poloz calmed expectations for an interest rate cut next month. The BoC Chief said he thought monetary conditions were appropriate—this came after comments from Senior Deputy Governor Carolyn Wilkins had suggested that the global economy was facing severe challenges which may take their toll on Canada and result in lower interest rates. The Canadian Dollar could be in for some market movement on Friday when the September Canadian growth figures are released. The rest of the week is quiet in terms of economic data; the Loonie could experience movement on oil prices and global developments.