Waiting game

Waiting for Sunak

The Pound approached the end of last week on a positive note against the US Dollar, as optimism over Brexit talks boosted sentiment. Both parties have been reported as softening their positions ahead of talks this week, increasing hopes a deal can be made. The week started with UK car sales data which showed the lowest level of purchases since 1971. UK construction data also highlighted a return to growth, with the quickest increase of activity in almost five years. The rest of the week is quiet for UK data, meaning the Pound could fluctuate on market sentiment and global events. UK Chancellor Rishi Sunak’s policy announcement on Wednesday could also create some GBP movement. Meanwhile, UK-EU trade talks are set to continue this week and could have the potential to move the GBP/EUR exchange rate. The Pound has been trading at interbank levels of 1.25 versus the US Dollar, and 1.10 against the Euro today. 

Eurozone retail figures impress 

The Euro has been trading in a tight range, retaining much of the ground it gained in the last few months. This week has begun with data showing Eurozone Retail Sales surged higher, at their fastest-ever pace, with a 17.8% leap in May on the month. Later this week, European Central Bank comments could have the potential to impact the EUR exchange rate. Additionally, Thursday will bring with it the Eurogroup meeting. Investors will be carefully watching to see if the Eurozone’s recovery fund will be given the all-clear to begin. The Euro has been trading at interbank levels of 1.13 versus the US Dollar, and 0.90 against the Pound today. 

US jobs smash forecasts

Last week, highly influential US employment data beat expectations with an increase of 4.8 million jobs in June, showing a strong rebound from the height of crisis levels. The US Dollar was able to firm slightly against other currency majors as a result. However, the US Dollar has started this week on the back foot as risk appetite increases. On the flip side, the recent resurgence of coronavirus cases in the US could dampen sentiment if more lockdowns look to be ahead. Manufacturing data and final service sector readings for June due out today could influence the US Dollar; in the rest of the week, there’s only a smattering of medium-tier data points that could create USD movement. However, speeches by Federal Reserve representatives could impact the Dollar. The US Dollar has been trending at interbank levels of 0.88 versus the Euro, and 0.79 against the Pound today. 

Aussie and Kiwi gain 

The Aussie Dollar gained some strength against the US Dollar last week but struggled to significantly break through the 0.70 range. Market sentiment has been tentative with concerns for second waves of Covid-19 dispelling long-term optimism, but riskier assets have had some opportunity to climb. New cases in Australia—as well as the US— have created a pause in gains for the Aussie Dollar. This week, the Reserve Bank of Australia will meet, and while interest rates are expected to remain on hold, at 0.25%, there’s the possibility that the central bank will attempt to pressure the AUD exchange rate lower given its recent strength.

The New Zealand Dollar has also been stronger in recent weeks, reclaiming almost all of this year’s losses versus the US Dollar, hovering near multi-month highs in recent sessions. This week, the New Zealand Retail Card Spending stats will be released, expected to detail whether June had a rebound following May’s -6.0% contraction. The Pound has been trading at interbank levels of 1.79 versus the Australian Dollar, and 1.91 against the New Zealand Dollar in today's session.  

Increasing exports 

The Canadian Dollar closed the week in a tight range against its US counterpart, keeping hold of recent gains. The Canadian Dollar had been climbing higher following positive data, some of which highlighted an increase in exports. However, an increase in coronavirus cases in the US could slow down export numbers in the coming months, which may weigh on the US Dollar exchange rate. In the week ahead, the most influential pieces of Canadian economic data are expected to be the June Employment Change and Unemployment Rate stats. Insight into how the labour market is performing during the coronavirus pandemic could be influential for the CAD exchange rate. The Pound has been trading at interbank levels of 1.69 against the Canadian Dollar today.