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AUD Exchange Rate Forecast: Brexit Deadline, Eurozone Inflation, US Growth, and Australian Manufacturing Data Ahead

GBP – Brexit deal deadline in focus

Last week

– Chancellor to the Exchequer Phillip Hammond presented his autumn budget on Wednesday which announced £3 billion was being allocated for Brexit contingency plans.

– The pound rallied against currencies such as the Norwegian krone and Swedish krona by over 1.0% on the back of Brexit optimism early in the week.

– Reports showed UK consumer confidence had reached its lowest level since directly after the Brexit referendum.

– UK mortgage approvals dropped to a 13-month low – October’s number came in at 40,488.

– Papers reported that Britain might feel a pay squeeze that lasts a couple of decades.

– The Confederation of British Industry (CBI) announced that retail sales made a comeback in November despite a shock decline in October.

Week ahead

This week could be an interesting one for sterling with the Bank of England (BoE) putting the Royal Bank of Scotland (RBS) and Barclays in the spotlight as it runs its annual stress tests. 2016 saw RBS fail and as a result, its shares dropped by 5.0% as the bank made reforms to pass. The measures were introduced in 2014 in a bid to ensure the biggest lenders would be able to withstand events such as a global and local recession, as well as a fall in sterling of 27.0% and interest rates at a much higher 4.0%.

Additionally this week, Nationwide house price data will emerge along with the BoE Financial Stability Report on Tuesday, followed by BoE consumer credit and mortgage data on Wednesday. Thursday’s consumer confidence number could create a significant response from the pound, and Friday will close the week with Markit’s November manufacturing purchasing managers’ index (PMI). Several BoE representatives are expected to speak in the week ahead which could create GBP fluctuations.

Another ongoing element that may impact the pound is Brexit. Theresa May has just a week to put an appealing offer to Europe for the divorce settlement, and developments could have a significant impact on sterling.

 

EUR – Eurozone inflation and labour market figures ahead

Last week

– German coalition talks collapsed at the start of the week which pressured the single currency lower as it looked as if fresh elections could be called.

– EUR/USD hit a six-week high after positive Eurozone growth figures created a single currency rebound.

– Additionally, supporting the euro towards the end of the week were renewed hopes that Angela Merkel may be able to form a minority government with the support of the German Social Democrat party.

Week ahead

As with the UK, markets will be watching how Brexit negotiations play out. The GBP/EUR exchange rate has experienced some fluctuations on comments and speculation from both sides, and it’s likely to continue affecting the currency pair for some time. Meanwhile, the most influential data this week is expected to be Tuesday’s German consumer confidence number, Wednesday’s Eurozone business and consumer confidence readings and Germany’s inflation data, followed by German and Eurozone unemployment numbers and Eurozone inflation on Thursday. European Central Bank (ECB) representatives are also scheduled to talk this week and may create market movement.

 

USD – Make or break for Trump’s tax reforms

Last week

– Markets were slightly subdued last week on account of the Thanksgiving celebrations in the United States.

– The US dollar to South African rand (USD/ZAR) exchange rate rallied to reach levels of 14.1726 after developments in South Africa.

– GBP/USD rose to a two-week high on reports of a subpoena regarding Trump, the election, and Russian involvement.

– Fed Chair Janet Yellen made some dovish comments last week which were echoed by the Federal Open Market Committee (FOMC) with concerns about inflation prominent.

Week ahead

This is set to be a make or break week for President Donald Trump and his $1.4 trillion tax overhaul with a vote forecast for as soon as Thursday. Democrats will attempt to throw the plans out the window, and the Republican party needs a minimum of 50 of its 52 members to back the bid.

In terms of economic data, there are a plethora of ecostats out in the week ahead that may impact the greenback. The most notable releases will be new home sales on Monday, gross domestic product growth on Wednesday, personal spending and income figures on Thursday, before the week closes with ISM manufacturing numbers on Friday. Federal Reserve representatives are due to speak throughout the week, and their comments could also impact the buck.

 

AUD – GBP/AUD, USD/AUD register highs

– GBP/AUD hit a six-month high on Brexit optimism and less appetite for riskier currencies.

– Australian employment change numbers printed at 3.7K instead of the 18.8K expected.

– AUD/USD extended its losses to hit a five-month low and Morgan Stanley has forecast a decline to 67 US cents in 2018.

– Also pressuring the Aussie lower were wage growth concerns from the Reserve Bank of Australia (RBA). The latest meeting minutes highlighted doubts over incomes and the amount of time it will take for inflation to climb.

– This week is a quiet one for Aussie data with Thursday being the most eventful day with new home sales, private sector credit, building permits, manufacturing, and private capital expenditure numbers making their way onto the scene.

 

CAD – Oil reaches 2015 high

– The Canadian dollar reached a nine-day high against the US dollar (CAD/USD) on the back of oil price gains in Wednesday’s North American session. Crude reached $58 per barrel – the first time markets have seen this level since July 2015.

– Canadian retail sales disappointed markets as the slowdown in growth the Bank of Canada (BoC) has warned about took hold. The September figure rose only 0.1%, despite expectations for a healthier 1.0% climb.

– This week the Bank of Canada will hold a press conference on Tuesday after the release of the central bank’s Financial System Review.

– Friday will be another major day for the CAD exchange rate with the release of GDP growth rate, unemployment rate, employment change, and manufacturing figures.

 

NZD – RBNZ Financial Stability Report ahead

– The New Zealand dollar declined after trade balance data printed negatively, showing a –NZ$871 million deficit in October.

– This week, the Reserve Bank of New Zealand (RBNZ) will release its Financial Stability Report in Tuesday’s antipodean session, which may create some Kiwi market movement.

– Also out this week are New Zealand building permits, business confidence, import and export prices, and terms of trade numbers which may have a mild to moderate impact on the Trans-Tasman currency.

 

ZAR – S&P’s downgrades South Africa

– Last week credit rating agency Standard and Poor’s (S&P) downgraded South Africa’s local currency rating to BB+. Moody’s Analytics kept its Baa3 assessment, but a downgrade could still come as the agency has placed the rating on review.

– Economic data this week will include business confidence, trade balance and manufacturing numbers. By the end of the week markets will be speculating as to how the South African GDP growth rate stat will print the following week on 5th December.

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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