Ahead of the Bank of England (BoE) interest rate decision and announcement of the UK’s budget, the Pound was trending lower against a number of its major currency counterparts. The British currency was left reeling after a report conducted by Bloomberg insinuated that there’s a 23% chance of the BoE cutting interest rates this year. GBP may recover some ground against rivals like the Euro and US Dollar as the week continues if UK employment data details an increase in average earnings. However, if the BoE meeting minutes indicate that the central bank is prepared to lower borrowing costs in the months ahead Sterling is likely to be pressured lower. A budget which reveals harsh spending cuts would also be GBP negative.
Increasing demand for safe-haven assets amid sliding commodity prices bolstered USD demand at the beginning of the week. The US Dollar largely held gains despite domestic retail sales data detailing a slide in consumer spending in February. The -0.1% month-on-month dip was a better result than the -0.2% drop economists had forecast and a marked improvement on January’s negatively revised -0.4% result. If the Federal Open Market Committee (FOMC) leaves the door open to rate hikes in 2016 the ‘Greenback’ could romp higher against its peers before the weekend. Conversely, a dovish attitude on the part of policymakers would limit the currency’s appeal.
Two positive ecostats for the currency bloc, in the form of upbeat industrial production and unemployment figures, helped the Euro recover from last week’s ECB-inspired bout of volatility. The common currency advanced on a broadly-softer Pound and held its own against the US Dollar. As the week progresses the Euro could enjoy further support if the Eurozone’s trade balance, inflation and labour cost reports print positively.
With the price of Australia’s key commodity, iron ore, on the decline and the Reserve Bank of Australia (RBA) policy meeting minutes indicating that rates will be cut if the economic headwinds surrounding China and Japan pick up, the Australian Dollar struggled overnight. The next cause of AUD market movement is likely to be the Westpac Leading Index for February. Australia’s employment report will also prompt ‘Aussie’ movement before the end of the week.
New Zealand Dollar
Dairy price weakness prevented the ‘Kiwi’ from recovering the ground lost following the Reserve Bank of New Zealand’s (RBNZ) recent surprising decision to cut interest rates. While the currency has stabilised against a number of its peers, the New Zealand Dollar could revert to bearish form if New Zealand’s Current Account Balance or fourth quarter growth data provides cause for concern.
Canadian Existing Home Sales were shown to have risen by 0.8% on the month in February but the sliding price of crude oil prevented the Canadian Dollar from seeing any benefit from the improved figure. Over the rest of the week oil price movements are likely to remain the main source of CAD volatility, but investors with an interest in the currency will also be focusing on Canada’s Manufacturing Shipments, Wholesale Sales and CPI reports.