Will Trump's Infrastructure Plans Boost the USD? UK Inflation and Australian Labour Data Ahead
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Will Trump’s Infrastructure Plans Boost the USD? UK Inflation and Australian Labour Data Ahead

13 February 2018 by FC Exchange

This week has a few key events which could create GBP, AUD, USD, EUR, CAD, and NZD exchange rate movements, say currency experts FC Exchange.

GBP – Sterling snaps back from BoE gains

Last week

– The pound spiked last week after the Bank of England (BoE) hinted that UK interest rate hikes might happen sooner than markets expect. The central bank revised its growth forecasts higher and suggested inflation will remain above target. The pound briefly jumped above 1.40 barrier against the US dollar (GBP/USD) on the comments, while climbing by over 1.0% against other currencies such as the euro (GBP/EUR), Australian dollar (GBP/AUD), Canadian dollar (GBP/CAD), and New Zealand dollar (GBP/NZD).

– The pound exchange rate eased towards the end of the week after the UK economy produced a mixed bag of economic data. The UK’s manufacturing production figure fell from 3.8% to 1.4% on the year in December, while the industrial production reading came in flat at 0.0% after the previous month’s 2.6%.

– Adding to sterling’s woes at the end of the week was news the UK’s goods trade balance had grown to its biggest in 16 months.

Week ahead

This week could be an exciting one for GBP movement with Tuesday’s highly significant UK inflation data. Consumer prices are forecast to fall from 3.0% to 2.9%. BoE policymakers are also scheduled to speak this week which could allow sterling some extra inspiration to move. The tail-end of the week will be quieter, with only retail sales due out on Friday. Brexit and other UK political developments could also create some market volatility.

EUR – Political stability ahead of Italian election

Last week

– In the Eurozone, retail sales slipped from 2.8% to 1.9% in December on the year.

– Markets also spent some time digesting European Central Bank (ECB) President Mario Draghi’s recent comments regarding Brexit. He said: ‘The bottom line is this one – either the negotiation is well managed and there won’t be substantial risk, or it is not and then the risks will be there, so we’re certainly looking at that and we’ve got to be prepared.’

– Last week also saw some political stability for the euro as German Chancellor Angela Merkel managed to secure a coalition deal. The deal is still awaiting approval but should give investors in the euro a boost of confidence ahead of the Italian elections in March.

Week ahead

Wednesday could be an exciting day for the euro with the release of German, Italian, and Eurozone gross domestic product (GDP) figures as well as Eurozone industrial production data. These are likely to be the most influential ecostats for the single currency in the week ahead, and market movement could be more pronounced around this time. Additionally, several ECB members will be speaking throughout the week which could contribute towards EUR exchange rate movement.

USD – Dollar eases after gains

Last week

– The US dollar hit a one-month high in Friday’s trading but has dropped back so far in Monday’s session.

– The highly influential US ISM non-manufacturing/services composite index climbed from 56.0 to 59.9.

– The dollar continued its recent revival, buoyed by labour market data which showed an upswing in US wages. The dollar’s decline this year has been a major talking point amongst markets; however, broad-based volatility in other assets has taken some of the spotlight away from the greenback allowing it to recover from a seven-week losing streak.

– Expectations for a steep Federal Reserve interest rate hike cycle circulated the markets.

Week ahead

Investors will be watching the unveiling of the highly-anticipated infrastructure upgrade details from US President Donald Trump on Monday. If his plans were to work as forecast, there could be more cause for the US Federal Reserve to hike interest rates as inflation could rise. Investors will be paying close attention to Wednesday’s consumer price ecostats to gauge the pace of inflation. Wednesday will also see the release of US advance retail sales figures, while Friday will bring with it the University of Michigan sentiment index.

 

AUD – Australian dollar awaiting employment numbers

– Last week the Australian dollar hit a six-week low against the US dollar (AUD/USD) as stocks stumbled and volatility continued to climb.

– The Reserve Bank of Australia (RBA) also released its latest statement, saying that Australian unemployment will fall quicker than previously thought, but that inflation may struggle to reach its target until somewhere in the middle of next year.

– Thursday will see the release of Australian employment change and unemployment rate numbers. The RBA Governor will also testify to parliament on Thursday.

 

CAD – Canadian labour market surprises

– The Canadian dollar hit a six-week low against the US dollar (CAD/USD) last week after oil prices slid.

– The Canadian labour market produced surprising figures in January; the unemployment rate rose to 5.9% from 5.8%, and the Canadian net change in employment number contracted by -88.0K rather than printing at +10.0K as economists had expected.

– It’s a quiet week ahead, meaning Canadian dollar movement could be dictated by commodity prices and events elsewhere.

 

NZD – RBNZ two-year forecast ahead

– The Reserve Bank of New Zealand (RBNZ) decided to keep interest rates on hold at the record-low 1.75%. The central bank also slashed its interest rate forecasts, suggesting it won’t reach the middle of its target until the close of 2020.

– This week the Reserve Bank of New Zealand (RBNZ) will release its two-year inflation expectation which could create some market movement as investors try to predict interest rate adjustments.

– Additionally, New Zealand house sales data will emerge on Wednesday, followed by business manufacturing numbers on Thursday.

Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.

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