Last week, the Pound was on course to register its worst monthly losses in a year against the US Dollar, while putting in its poorest performance against the Euro in around two years. The Pound has rebounded from the lows seen at the end of last week’s trading, but more volatility could lie ahead as chaos continues in Westminster. Theresa May is carrying out her final days as Prime Minister, while most of the front-runners for her position insist on a hard-line Brexit approach which could see the UK leave the EU without a deal. This week, Trump’s in town, not only showing support for Boris Johnson but also offering his thoughts on Brexit and a trade deal post-exit. However, given his recent trade disputes with Mexico, China, and the EU, his trade comments may come with questions. Comments from the Bank of England (BoE) will be in focus this week, as well as data documenting the productivity of the UK's services, manufacturing, and construction sectors.
There is a chance comments from Donald Trump in the coming weeks regarding trade with the Eurozone could put pressure on the Euro exchange rate, so markets will be watching for any mention of his plans while he visits the UK. The Euro has been on a downward path against the US Dollar in recent months; any hints that the European Central Bank (ECB) might begin to support the economy with monetary stimulus could give the Euro cause to soften further. Therefore, the latest Eurozone inflation reading due out on Tuesday will be of particular interest and could impact the Euro exchange rate, especially if it declines as expected.
US President Donald Trump isn’t afraid to put a cat among the pigeons; last week he told Mexico unless illegal immigration stops, escalating tariffs will be in place in two weeks’ time. Additionally, Trump has tweeted another statement, suggesting India’s status will change, ending duty-free trade on over $6bn of goods; whether this is a fresh tariff dispute in the making remains to be seen. One of the main events of the economic calendar this week will be the latest US labour market data on Friday. If wages continue to struggle to grow, the impact on inflation may cause the Federal Reserve to look at its monetary policy stance, with the potential for a rate cut on the horizon. Such a move would likely be a dampener for the US Dollar.
The Australian economy produced some disappointing data last week, but the movement, as a result, was limited. Both the Aussie and Kiwi Dollars have been feeling the pressure of late as global trade tensions escalate and investors look for safe-haven assets. However, if it appears that the US Federal Reserve may be teetering on the edge of interest rate cuts, the Aussie might gain some favour. Data out today has shown Australia’s manufacturing sector had slowed before the Federal election, but eyes will turn to the latest services and construction readings this week which make up a larger proportion of the economy.
The Kiwi Dollar has been a victim in the US-China trade war too, and New Zealand business confidence is reflecting concerns over the spat. Last week showed 32.0% of New Zealand businesses in May expect conditions to worsen in the next year, an improvement from the previous month’s 37.5%, but still a disappointing number. There isn’t much by way of influential domestic data out of New Zealand this week, but House Prices and Commodity Price stats will be revealed on Wednesday and Thursday. Meanwhile, the Kiwi will be susceptible to geopolitical developments and risk sentiment.
Last week, the Canadian Dollar slipped after the Bank of Canada (BoC) intimated that there could be a long wait before interest rates rise again. Canada’s largest commodity, oil, also noted a decline in value which weighed on the Loonie exchange rate. One of the main Canadian economic events this week will be the May labour market data release. Forecasts suggest the Net Change in Employment figure could see a -5.5K contraction, while wages decline from 2.6% to 2.4% on the year. Disappointing stats like this could cause some Canadian Dollar softness.