Headlines
GBP/EUR Trending Above 1.39 –
‘Grexit’ Concerns Weigh on Pound
‘Cable’ Surges before FOMC Announcement –
Rate Bets Pushed Back
Australian Dollar Trends Lower before RBA Comments –
Stevens May Discuss Rate Cuts
Canadian Dollar Holding Steady –
Data in Short Supply
Sterling
Sterling had a fairly bullish few days of trading last week as the Bank of England (BoE) released surprisingly hawkish meeting minutes.
As the minutes implied that the Monetary Policy Committee (MPC) is becoming divided on the subject of interest rate revisions, the Pound rallied against a number of its peers.
While the GBP/EUR pairing briefly pushed above 1.40, ‘Cable’ advanced beyond the key technical support level of 1.50 and managed to close out the week trending at 1.51 despite the release of below-forecast UK retail sales numbers.
The main driver of Pound movement this week is likely to be the UK’s growth data for the first quarter. Economists are estimating a slowing in output, and if that occurs the Pound’s bullish run may be halted until after the general election.
A mixed bag of economic reports for the Eurozone, coupled with deteriorating negotiations between Greece and its creditors, conspired to push the Euro lower against a number of its most traded rivals before the close of last week.
Although the German ZEW Current Situation index printed well above expected levels, a gauge of consumer confidence for the currency bloc as a whole declined unexpectedly and Markit Manufacturing/Services/Composite PMIs for the Eurozone and its largest economies all fell short.
Demand for the Euro was further undermined on Friday as a gathering of Eurozone finance ministers in Riga ended with the Greek financial chief being soundly chastised by his peers. Reports that no contingency plans are being drawn up to deal with the possible failure of the Greek negotiations also took a toll.
Speeches to be given by various European officials over the course of the day could dictate the direction taken by the Euro during the European session.
Another week of concerning US ecostats saw the odds of the Federal Reserve increasing interest rates this summer tumble and the US Dollar accordingly softened against rivals like the Pound, Australian Dollar and Canadian Dollar.
Although the safe-haven currency did derive some support from Chinese growth concerns, the fact that borrowing costs are likely to remain on hold for longer did see the ‘Greenback’ enter the weekend trending broadly lower.
The Federal Open Market Committee (FOMC) is scheduled to deliver its latest policy announcement this week. Should policymakers adopt a notably dovish tone, we can expect to see the US Dollar fall. Indications that borrowing costs will remain on hold until the end of the year may even push ‘Cable’ towards or beyond the 1.52 level.
Today’s US Markit Services and Composite PMIs could have an impact on US Dollar trading, particularly if the services gauge shows the decline expected.
Canadian Dollar
A lack of particularly influential economic reports for Canada left much of the Canadian Dollar’s movement up to global economic developments, US data and commodity price movements. At the start of this week the ‘Loonie’ was able to register a modest gain against the Pound and was holding steady against the US Dollar.
Domestic data is likely to have a more notable impact on Canadian Dollar trading this week, with the nation set to publish Industrial Product Price/Raw Material Price Indexes, GDP figures and RBC Manufacturing PMI.
Investors will also be looking to a testimony to be given by Bank of Canada (BOC) Governor Stephen Poloz. Any references to the possible path of interest rates are likely to affect demand for the Canadian Dollar.
Australian Dollar
With the Reserve Bank of Australia’s (RBA) meeting minutes indicating that an interest rate cut could be on the way and Chinese data printing below expected levels, the Australian Dollar experienced a rocky few days of trading at the beginning of last week.
Although better-than-forecast Australian inflation figures later helped the ‘Aussie’ recover losses, the South Pacific currency remains under pressure ahead of a speech to be given by RBA Governor Glenn Stevens.
Further rate cut hints from the RBA chief would push the ‘Aussie’ lower.
Ahead of the release of New Zealand’s trade balance data (due out on Tuesday), the ‘Kiwi’ recorded gains against a number of its currency counterparts.
Last week the Reserve Bank of New Zealand (RBNZ) intimated that not only are interest rates unlikely to increase, a rate cut could even be on the cards.
The New Zealand Dollar plummeted in reaction to these comments but has since managed to recoup losses, thanks in part to the prospect of borrowing costs remaining lower for longer in the US.
Data Released Today
14:45 EUR ECB Announces Asset Purchases High
14:45 USD Markit US Composite PMI (APR P) Medium
14:45 USD Markit US Services PMI (APR P) Medium