Pound Sterling: Continued Brexit Fears Cause GBP Losses
The Pound has made minor losses against the Euro and the US Dollar today, even though a Brexit safety net has recently been created.
This has been the agreement on a so-called ‘backstop’, which will ensure that there will be no hard border between Ireland and Northern Ireland in the future.
The backstop is more of a ‘plan B’ than an outright policy plan, as it is designed to prevent border issues if all else fails and a customs agreement cannot be reached.
There are still broader concerns about whether the UK government will be able to finalise a Brexit deal before the October deadline, which have left Sterling in low demand today.
Looking ahead, there could be GBP volatility on Wednesday when UK inflation rate data for April is released.
The readings are tipped to show rising inflation in all fields, which could devalue the Pound because of fears about returning wage squeeze conditions for UK consumers.
Euro: EUR Steady after Rising German Prices Raise Hopes for Inflation Acceleration
The Euro has made minor gains against the Pound today, in addition to advancing against the US Dollar.
This generally positive movement has been caused by the latest German price data, which has shown rising wholesale prices and growth in producer price indexes (PPI).
Higher prices could contribute to higher Eurozone inflation in the future, which will ultimately raise the chances of a European Central Bank (ECB) interest rate hike.
Next week’s first major Eurozone data will be Wednesday’s Eurozone PMI activity readings for May.
If the overall Eurozone readings show forecast-matching slowdowns in economic activity, then the Euro could make midweek losses against its currency peers.
US Dollar: ‘Full Employment’ Comments from Fed’s Kaplan Leave USD Unsettled
Following remarks from Federal Reserve policymaker Robert Kaplan, the US Dollar has traded tightly against the Pound but fallen against the Euro.
Mr Kaplan has suggested that US unemployment might not fall any further, as in his view:
‘Our judgment at the Dallas Fed is that we are either at or already past full employment.’
On the plus side, this suggests an increased chance of further US interest rate hikes in 2018.
On the other hand, however, Mr Kaplan won’t vote on interest rates this year so other policymakers might not share his optimistic viewpoint.
The US Dollar may be further influenced by this afternoon’s speech from Fed member Lael Brainard.
Ms Brainard is a Fed voting member this year, so her comments could have a significant impact on the USD.
Australian Dollar: Signs of Greater AU Spending Push AUD Up
Despite a recent surprise increase in the Australian unemployment rate, the Australian Dollar has advanced against the Pound and US Dollar but dropped against the Euro.
This mixed performance follows the release of Commonwealth Bank data which suggests rising levels of spending across the country.
Commonwealth’s Business Sales Indicator (BSI) has shown a 0.9% rise in sales during April, suggesting continued resilience in the retail sector.
Next week’s first significant AU data will be Wednesday’s measure of construction activity for Q1 2018; this is predicted to show a rise of 9%.
Given that Q4 2017 saw a -19.4% drop in construction output, such a result could cause an Australian Dollar advance next week.
New Zealand Dollar: Post-Budget Optimism Pushes NZD Higher
The latest New Zealand Dollar movement has been positive, with the NZD posting moderate gains against the Pound, Euro and US Dollar.
This appreciation is mainly down to a positive reception to the 2018 budget, which promises a significant amount of spending for healthcare and education across the country.
Future NZD exchange rate movement could be caused by Sunday’s retail sales stats, which risk devaluing the New Zealand Dollar if they show forecast-matching slowdowns.
Canadian Dollar: CAD Advances as Oil Prices Stay High
As with earlier in the week, the Canadian Dollar has risen in value today thanks to growth in the price of crude oil.
The cost of crude has been pushed higher recently by the US’s withdrawal from the Iran nuclear deal, as well as the increased risk of Middle Eastern conflicts disrupting the supply of oil.
This afternoon’s Canadian inflation rate stats might influence the Canadian Dollar.
Faster price growth will increase the chances of a Bank of Canada (BOC) interest rate hike and could push the CAD higher against its peers.
This week the US Dollar was touching three-year highs when valued against a basket of major currencies. The greenback’s traditional role as one of the safe-haven currencies is helped by a domestic economy that is largely immune to the threats of the coronavirus.
Last update: 22 Feb, 2020
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Posted: 3 Feb, 2020
The threat of a proxy war between the US and Iran in Iraq has pared back some of the recent gains of “risk-on” currencies.
Last update: 8 Jan, 2020