Pound (GBP) Exchange Rate Forecast Depends on BoE
Although last week’s UK GDP report gave the pound a lift, GBP exchange rates came under pressure before the weekend as Bank of England (BoE) rate hike speculation dominated demand.
There are a few notable UK releases due out ahead of Thursday’s central bank decision (including the GfK consumer confidence index and Markit manufacturing/construction PMIs) but the impact of the results may be muted – unless, of course, they’re substantially worse than forecast and have a negative impact on BoE rate hike bets.
As it stands, the confidence measure is expected to worsen from -9 to -10, the manufacturing index is forecast to remain unchanged and the construction PMI is predicted to improve from 48.1 to 48.5.
Developments in Catalonia Leave Euro Exchange Rates Weaker
While the Euro briefly benefited from Germany’s import price figures on Friday, Catalonia’s declaration of independence – and Madrid’s decision to impose direct rule – sent the common currency spiralling lower.
As Spain is the Eurozone’s second largest economy, the ongoing uncertainty is likely to limit any Euro gains.
That being said, today’s German inflation data could give EUR exchange rates a boost if it shows an uptick in consumer price pressures. A slowing in inflation, meanwhile, would increase the likelihood of the European Central Bank (ECB) leaving monetary policy accommodative for longer and keep the Euro under pressure.
US Dollar (USD) Exchange Rate Volatility Expected as FOMC Decision Looms
Upbeat US growth data for the third quarter kept the US Dollar resilient on Friday. The rate of output might have slowed, but the 3.0% annualized reading was significantly better than forecast.
Upcoming US news to be aware of includes the US consumer confidence index, the ADP employment change report and the ISM manufacturing figures.
With so many high-profile US stats on the calendar this week, we could see significant USD movement.
The Fed will also be delivering its November interest rate decision. As long as all signs point towards a third and final rate hike in December, the US Dollar will remain sturdy.
BOC Rate Decision Continues Weighing on Canadian Dollar (CAD) Exchange Rates
Last week’s Bank of Canada (BOC) interest rate decision significantly reduced the odds of the central bank increasing interest rates further over the next couple of months.
The news left the Canadian Dollar broadly weaker and CAD has so far failed to recover much of its losses.
The outlook for CAD exchange rates could remain gloomy if tomorrow’s year-on-year Canadian growth data reveals the slowdown expected. GDP is believed to have fallen from 3.8% to 3.5% year-on-year.
Political Shifts Unsettle Australian Dollar (AUD) Exchange Rates
At the tail end of last week demand for the Australian Dollar (AUD) was undermined by the news that Australia’s Deputy Prime Minister Barnaby Joyce was disqualified from office as a result of an investigation into his dual citizenship.
Australian data to watch out for this week includes the nation’s home sales report, the AiG performance of manufacturing index, Australian trade data and the AiG performance of services index.
Pound to New Zealand Dollar Exchange Rate Upbeat before NZ Jobs Data
The unsettling result of New Zealand’s recent election and speculation that the Reserve Bank of New Zealand’s (RBNZ) mandate will be widened pushed NZD broadly lower last week, and the currency remains unattractive.
Although political concerns are likely to remain the driving force behind ‘Kiwi’ movement, the currency could claw back some of its losses if this week’s domestic employment figures prove positive.
Data Released
13:00 EUR German Consumer Price Index (MoM) (OCT P) Medium 0.1% 0.1%
13:00 EUR German Consumer Price Index (YoY) (OCT P) High 1.7% 1.8%
21:45 NZD Building Permits (MoM) (SEP) Medium 10.2%