Who's running the show?
Who's running the show?
The Pound has climbed around 2.0% against a basket of other currencies in the last week, as markets anticipate a more prudent approach to policy under new UK Chancellor Jeremy Hunt. Last week, the former UK Chancellor Kwasi Kwarteng was sacked by Prime Minister Liz Truss—Kwarteng took the title of the second-shortest term in UK history. Political infighting and manoeuvring will likely be in the spotlight in the coming months, and Hunt will also mark his autonomy over economic policy and public finances. Economists and the media have taken the view that the Chancellor is now running the show, with a distinct change of rhetoric coming out of Number 10. Moreover, supporters of Rishi Sunak have stepped up a gear in their efforts to install the former Chancellor. In the week ahead, the UK's inflation rate data will be in focus on Wednesday, with expectations for an increase from 9.9% to 10.0% on the year in September—a rise of 0.4% on the month. Other UK data to watch will include retail and confidence figures released towards the end of the week.
Weighing the economy
Against the US Dollar, the Euro has been trading in a tight range, as markets contemplate the upcoming European Central Bank meeting. It's thought policymakers may be seeing a division in their thoughts for monetary tightening, as concerns over recession weigh. However, a 75 basis point hike is expected next week, followed by a 50 basis point increase in December. The final Core Inflation Rate figure for September on the year will be released this week, with expectations of a rise from 4.3% to 4.8%. Meanwhile, ZEW's Economic Sentiment Index will also reach markets with October's reading. Additionally, data detailing another measure of the confidence of consumers will print, and European Central Bank President Christine Lagarde will also speak.
Taking a breather
Dollar strength took a breather last week, giving some reprieve to other currencies. Markets expect the Federal Reserve to announce its fourth consecutive 75 basis point interest rate hike at its meeting in November. These expectations, or any changes to forecasts, could influence the Dollar in the coming weeks, especially as many expect a hard landing for the US economy with higher inflation and interest rates able to create economic weakness. There's no high-tier data out in the week ahead, only medium, so the US Dollar may feel more significant movement from geopolitical developments in the week ahead. In saying that, data detailing industrial output and building works will be released. Additionally, the Federal Reserve will release its latest Beige Book, and many Fed officials will speak throughout the week.
AUD and NZD
Gloomy global outlook weighs
A gloomy global outlook has soured appetite for the Aussie Dollar in recent trading, with the Pound and other major currencies able to make notable gains against it. The Pound also marked gains against the New Zealand Dollar last week. This evening, New Zealand inflation data will be released, with forecasts suggesting a fall from 7.3% in the year's second quarter, to 6.6% in Q3. On Tuesday, the Reserve Bank of Australia will release its latest meeting minutes, which may shed some light on the recent decision to hike interest rates by only 25 basis points in its last meeting, rather than the 50 many had expected. The AUD/NZD currency pair has increased ahead of the release, following declines in the previous five trading sessions. Other key pieces of data to watch include Australian Employment Change and Unemployment Rate stats, as well as New Zealand's Balance of Trade figures.
'Work to do'
Last week, Bank of Canada Governor Tiff Macklem said that sustained US Dollar strength could mean policymakers have further 'work to do' when it comes to interest rates. The Canadian Dollar has dropped by around 8.5% against the US Dollar since August. In the week ahead, highly influential Canadian inflation rate data will be made available, with expectations for a decrease from 7.0% in August, to 6.8% in September on the year. Retail and housing price data will also be revealed later in the week. Further noise around oil prices may also impact the Loonie exchange rate.
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