The economic effect of the coronavirus
The Pound could experience some movement in the week ahead as Brexit negotiations re-start. With the UK's window to request an extension closing at the end of June, there could be some extra volatility in the coming months. If the UK doesn’t seek an extension, the possibility of a no-deal will be firmly on the table, again, and could put pressure on the British currency. Today, the Pound has reached a three-week high versus the US Dollar as the UK’s lockdown restrictions begin to ease. Today’s data has also shown an uptick in UK manufacturing activity, with Markit’s latest Purchasing Managers’ Index coming in at 40.7 up from the previous 32.6. Although this is a welcome increase, it remains a significant way off the 50.0 mark which separates expansion from contraction. In the rest of the week, house price, services, construction, and consumer sentiment stats will be published.
The Euro gained on the prospect of the European Commission bolstering its recovery fund last week. In the 2008 financial crisis, the Eurozone was somewhat slow to react to the chaos, but appears to be responding quickly throughout the coronavirus crisis. Today, the Euro’s been approaching a two-month high versus the US Dollar. One of the main events in the week ahead will be the European Central Bank’s monetary policy meeting and follow-up press conference. Meanwhile, Unemployment Rate data and Retail Sales stats will also be released.
The US Dollar softened towards the close of the week ahead of President Trump’s speech. However, the President didn’t suggest any new tariffs on China when outlining his response to the recent Hong Kong situation, easing concerns the US-China trade war would flare further. Influential data for the US Dollar this week includes manufacturing and labour market stats. The US Unemployment Rate is expected to jump significantly from 14.7% to 19.7%. Meanwhile, the highly influential US Non-Farm Payrolls stat, which registered a record decline of 20.5 million jobs in April’s reading, is expected to show another significant contraction.
AUD and NZD
The Australian Dollar surged by over 1.2% to hit a three-month high in Monday’s Trans-Tasman session as risk sentiment increased, pushing the US Dollar towards 11-week lows against a basket of currencies. The Aussie hit a 10-month high versus the Canadian Dollar, and a three-month pinnacle versus the safe-haven Yen. The New Zealand Dollar also registered gains in the region of 0.6%.
In the week ahead, the Reserve Bank of Australia is scheduled to meet to discuss monetary policy in Tuesday’s Oceanic session, but market expectations largely suggest policy will remain unchanged. Australia’s latest GDP Growth Rate stat will also be out this week, but it’s a quiet week for New Zealand economic data, leaving the Kiwi sensitive to global developments and commodity prices.
Growth data ahead
On Friday, the Canadian Dollar retreated from a two-and-a-half-month high versus the US Dollar following the release of Canadian growth data which showed a decline in the first quarter and the worst reading since 2009 when the Global Financial Crisis was in full swing. Flash estimates suggest that growth in April dropped by a record 11% from March as the economy slowed due to the coronavirus. The Canadian Dollar has firmed so far in Monday’s European trading, and there may be a host of opportunities in the week ahead for the Loonie to move, including any comments from the Bank of Canada after it’s interest rate decision—forecast to remain at 0.25%—and labour market data out at the close of the week.