After plummeting in the wake of the Bank of England’s (BoE) rate cut, the Pound extended declines over the course of last week as concerns about the easing measures deployed by the central bank and less-than-impressive domestic data took a toll. This week Sterling has recorded new multi-year lows against peers like the Euro, Australian Dollar and Canadian Dollar despite the UK’s Consumer Price Index showing an uptick in inflation in July. If Thursday’s domestic retail sales figure disappoints the Pound is liable to fall further still as economists have projected that it will take robust consumer spending for the UK to avoid recession.
With declining Federal Reserve rate hike expectations weighing on the US Dollar, the Euro has climbed by default, with the common currency posting gains across the board. EUR exchange rates have also been supported by reports revealing a significant improvement in Consumer Confidence in both Germany and the Eurozone as a whole. If data continues suggesting that the Eurozone has been relatively unaffected by the UK’s decision to Brexit, the EUR/GBP exchange rate’s uptrend is likely to continue for the short to medium term. Other ecostats from the Eurozone to be aware of this week include the region’s final inflation figures for July. Unless the results are markedly different from initial estimates the figures are unlikely to have much of an impact on Euro trading.
Below-forecast US retail sales and confidence data reduced the odds of the Federal Reserve increasing interest rates in September, and indeed in 2016 as a whole, and sent the US Dollar lower against several of its most-traded currency counterparts towards the close of last week. Rate hike expectations continue having an adverse impact on the ‘Greenback’ this week, with the currency struggling to hold ground against the Euro and higher-risk currencies like the ‘Aussie’. It would take a series of encouraging US ecostats to have a substantial impact on projections for borrowing costs so unless they materialise the US Dollar could continue struggling.
Although China, Australia’s largest trading partner, published some mixed data last week, general risk appetite and a weak US Dollar helped the currency stand firm against the US Dollar and record sizable gains against a broadly weakening Pound. The ‘Aussie’ dipped slightly on Tuesday following the publication of minutes from the last Reserve Bank of Australia (RBA) policy meeting as investors were left uncertain of the central bank’s intentions regarding future interest rate adjustments. This week’s Australian employment data could keep AUD bullish if it shows a notable increase in positions.
New Zealand Dollar
Expectations that the next Global Dairy Trade auction could show another increase in the price of New Zealand’s key commodity helped the ‘Kiwi’ gain on the US and Australian Dollars. Its performance against other rivals was more mixed. However, if today’s employment numbers for New Zealand show the impressive drop in quarterly joblessness from 5.7% to 5.2% forecast by economists, we may see NZD firm across the board.
The Canadian Dollar, often called the Loonie after the bird a Loon featured on the coin.
A lack of domestic data has left the Canadian Dollar at the mercy of oil price fluctuations. Although recent reports have indicated that the correlation between the price of black gold and the value of the ‘Loonie’ isn’t as strong as it once was, hopes that a future meeting between oil producing nations could result in a production cap have still lent the Canadian Dollar a measure of support. The big Canadian news of the week, the nation’s inflation and retail sales figures, is due out on Friday. An increase in consumer price pressures or higher retail sales could give the Canadian Dollar a boost.