Data revealed on Monday has shown British retailers experienced their most disappointing September on record with sales dropping by 1.3% on the year. Brexit uncertainty has been established as the main reason for the decline, with the British Retail Consortium asking the British government to agree on a deal rather than take the no-deal route later this month. In the week ahead, news on whether Boris Johnson’s Brexit deal will be acceptable to the EU could dominate some of Sterling’s direction. Meanwhile, Thursday will see a host of data out which could influence the Pound. Construction, manufacturing, and industrial figures will reach markets, along with monthly growth numbers. Comments from Bank of England policymakers throughout the week could also impact the way the British Pound trades.
The week has begun with further disappointment from the Eurozone in terms of data. Eurozone investor confidence is residing at its weakest levels since 2013, and German factory orders have tumbled by 6.7% year-on-year. The drop in investor sentiment comes after the European Central Bank tried to bolster economic growth with stimulus measures, introducing quantitative easing and cutting interest rates even further into negative territory, showing investors may be losing faith in how much impact the central bank can have. There are further German stats out this week which could influence the Euro, as well as the European Central Bank’s meeting minutes due out on Thursday. Investors will be looking for any clues as to how the central bank might manage its monetary policy in the months ahead.
Last month, the Pound to US Dollar exchange rate moved within a six-cent range and now October’s here, markets are eyeing the Brexit deadline just a few weeks away with the potential for further volatility. The US Dollar has been stronger given its safe-haven allure, in the middle of trade wars and a slowdown in global growth. The start of last week was full of concern that the recent slowdown in manufacturing across the globe had spread to the US and the services sector, which buoys the largest part of the economy. However, last week’s labour market data came in a little below, but close to economists’ forecasts, which seemed to ease some of the week’s earlier concerns. Comments by central bank Chief Jerome Powell this week could influence the Dollar, as well as the Federal Reserve’s latest meeting minutes released on Wednesday. The influential September inflation reading will be revealed on Thursday.
The Australian and New Zealand Dollars have been under pressure of late given recent interest rate cuts by the Oceanic central banks, weaker global growth and domestic data, and some flights to safe-haven assets in recent months. Last week, the Reserve Bank of Australia opted to cut interest rates to 0.75% from 1.00%. The Australian Dollar hit a more than ten-year low against the US Dollar at 0.6671 after the rate cut, but managed to stage some level of recovery later in the week due to optimism in the US-China trade talks. Meanwhile, the New Zealand Dollar hit four-year lows against the US Dollar on weaker economic data and the rate cut in Australia.
This week, the New Zealand Dollar dropped in Monday's antipodean session following news that China would only be willing to discuss a smaller range of topics with the US when talks begin on Thursday. Aside from politics, there are a few economic developments which could impact the Australian and New Zealand Dollars this week, including Aussie Business Confidence, Consumer Confidence, and Consumer Inflation Expectations, as well as New Zealand Manufacturing and Performance of Services stats.
Last week, the Canadian Dollar tumbled to a four-week low versus the US Dollar (CAD/USD) as oil prices declined and fears over weakness in the US manufacturing sector and how it could affect the Canadian economy weighed. This Friday, Canada will release its latest labour market figures. Economists expect to see a 7.9K rise in employment in September’s reading following the 81.1K in August, but any rise above expectations could bolster the Loonie exchange rate.