Watching the headlines

Taking a dip on negative rate suggestions

The Pound managed to regain some lost ground last week from earlier in the month. However, there were some sudden shifts, such as mid-week when the Bank of England suggested it would be reviewing the impact of negative interest rates in the UK. While the central bank suggested its existing stance is still adequate, in a bid to be prepared, policymakers said they would be looking to 'explore how a negative bank rate could be implemented effectively, should the outlook for inflation and output warrant it at some point'. The BoE kept its quantitative easing programme unchanged, and interest rates remained at 0.1% in line with forecasts, but some analysts have predicted adjustments by the end of the year. However, the week ahead could see some further GBP movement with headlines predominantly focusing on another UK lockdown, and the potential for no trade deal with the EU. This week, Manufacturing and Services PMIs will be out, as well as Consumer Confidence data, which could all moderately impact the way the Pound trades. 

Looking to the data 

The Pound managed to climb by around 1.8% against the common currency last week as it regained some ground. Meanwhile, against the US Dollar, the Euro fell by around 1.2% at the start of the week, before recovering most of its losses to finish the week relatively unchanged. The Euro has been quite range-bound in recent weeks, but a slew of economic data is out in the week ahead which could impact the way the common currency trades. Consumer Confidence, manufacturing and service sector data, and IFO surveys about the current situation and expectations for the future could all be sources of considerable EUR exchange rate movement. 

Keeping rates on hold until 2023

The Pound climbed by around 1.7% versus the US Dollar last week. The Federal Reserve announced it planned to keep interest rates on hold at zero until the end of 2023, and doesn't expect inflation to reach target until that year. However, with a number of Federal Reserve representatives speaking in the week ahead, the Dollar could have more opportunity to move. Additionally, Treasury Secretary Steven Mnuchin will also talk this week. In terms of the data calendar, manufacturing and services data will be out for release on Wednesday, as well as the highly influential Durable Goods Orders number on Friday. The Dollar will also be susceptible to changes in sentiment—which has started the week off on a sour note. 

Waiting for the Reserve's

The Pound climbed by around 1.5% versus the Australian Dollar last week, while softening by just under 1.0% versus the New Zealand Dollar. The Aussie Dollar registered some gains after jobs data beat expectations and the unemployment rate came in significantly below forecasts. This week is scheduled to be relatively quiet in terms of economic data, but Reserve Bank of Australia Deputy Governor Guy Debelle's speech this week could influence the Aussie Dollar. Meanwhile, the Reserve Bank of New Zealand will announce it's latest interest rate decision, with forecasts to stay on hold at 0.25%. However, there could be more hints about the future of monetary policy and the prospect of negative interest rates. Trade balance data will also be released. 

It's not easy, going green

The Pound managed to gain around 1.5% against the Canadian Dollar in last week's trading. The CAD exchange rate also softened at the end of the week against the US Dollar after Canadian Retail Sales data showed an underlying decline. The rising levels of the coronavirus have hindered Prime Minister Justin Trudeau's ambitious plans for a green economic recovery package which he's due to announce in coming weeks. This week, Canadian house prices and wage data will be released and could create some moderate movement.