Waiting for Brexit

GBP – Election on the way?

The Pound dropped below the 1.28 level against the US Dollar last week, for the first time in seven days as the Brexit outlook clouded. Last week, Boris Johnson may have made some progress, but not enough to get his withdrawal agreement passed. Now the British Prime Minister is pushing for an election before Christmas, and markets are waiting to hear whether the EU will issue a Brexit deadline extension, and for how long. Some of the most influential figures out in the week ahead will include manufacturing, construction, and consumer confidence data which may provide some moderate movement for the Pound. However, Sterling is very much dominated by Brexit, so headlines may have further sway on the British currency.  

EUR – A new era approaches 

Last week, European Central Bank President Mario Draghi made his final interest rate decision and followup press conference, before Christine Lagarde takes over in November. The Euro weakened on Draghi’s comments regarding the risks of an economic downturn in the Eurozone—an opinion further compounded by weak German data readings released on Friday. Lagarde faces a tough start to the job with ECB policymakers already at odds with one another over the central bank’s recent policy decisions. Thursday will be an interesting day for the Euro with the release of Eurozone inflation and growth numbers due for release. 

USD – The trade war takes its toll

Economic data disappointed last week, with the US Durable Goods Orders figure falling by the most in four months, showing the impact of the US-China trade war. Other data was also lacklustre; the stat for Existing Home Sales showed a significant monthly decline, eradicating recent monthly gains. The housing market has been offered some support this year by two interest rate cuts from the Federal Reserve. One of the main events for the US Dollar this week will likely be the Federal Reserve’s interest rate decision in the second half of the week. Markets are expecting a 0.25% cut in rates which could put pressure on the Buck.

AUD and NZD – Interest rates in focus 

Global political uncertainty hit the Aussie and Kiwi Dollars last week as investors favoured perceived safer assets. If a rate cut occurs for the US this week, there could be more pressure on the Reserve Bank of New Zealand to cut interest rates in November. Australia has had three rate cuts since May, so may be able to avoid another one at the next Reserve Bank of Australia meeting. RBA Governor Philip Lowe will give a speech in Canberra on Tuesday which could influence the Aussie Dollar, ahead of Wednesday’s inflation data for the third quarter. In New Zealand, Building Permits and latest Activity Outlook data prints could influence the Kiwi Dollar. Both the Aussie and the Kiwi could be sensitive to any global developments, such as the US-China trade dispute.

CAD – Retail sales pressure Canadian Dollar 

It was a quiet week for Canadian data last week, but Retail Sales figures noted a much bigger decline than forecast. The Canadian Dollar slipped as a result and edged away from three-month highs against the US Dollar. On Wednesday, the Bank of Canada will announce its latest interest rate decision with markets broadly expecting the rate to remain on hold at 1.75%. The August growth figure will be released on Thursday and is expected to inch higher from 1.3% to 1.4% on the year. Friday will bring with it manufacturing data for October, which could be highly influential for the CAD exchange rate.