The Euro has been struggling across the board recently as continued growth concerns continue to weigh on the single currency. Germany, the Eurozone’s largest economy, narrowly avoided falling in to a technical recession in the final quarter of last year with growth stagnating. The Euro has been further hindered by the increasingly cautious outlook from the European Central Bank (ECB) towards their future monetary policy, which has in turn slashed the odds of an interest rate hike this year from the ECB.
Theresa May fell to another parliamentary defeat last week which had a short-term negative impact on the pound. The home currency did however retrace the majority of its losses towards the end of the week as UK Retail Sales surprised, quite significantly, on the upside. Sterling is again trading higher this morning after comments from French President Macron suggesting that the EU are ready to give legally binding assurances that the Irish backstop is temporary.
The week ahead
GBP – Brexit will continue to be the main driver for GBP crosses, a common theme. Theresa May will be meeting with every EU leader and the European Commission chief this week, seeking concessions primarily on the Irish backstop. Should any other leaders soften their stance, as President Macron seems to have done, there is potential for some Sterling strength. Getting the EU leaders on her side, will however be an astronomically hard task for the Prime Minister. On the hard data front, wage and employment data out on Tuesday will be the key release to look out for this week.
EUR – The main release of the week for the single currency will be Thursday’s minutes from the previous ECB policy meeting. This will be closely scrutinised for any hints towards when an interest rate hike can be expected in the Eurozone. Any further hints that an interest rate hike will not take place this year should be detrimental to the Euro. ZEW sentiment survey numbers out tomorrow also have large potential to move EUR crosses.
USD – The ball is currently in the court of Donald Trump when it comes to US Dollar movement this week. Market attention will be drawn to the US President as we wait to hear what tariffs he will impose upon European car imports. He is expected to announce a 25% tariff very soon which could actually lend some strength to the greenback. The Federal Reserve will also be releasing the minutes from their latest policy meeting on Thursday. Should there be any hint of a change from their current neutral stance towards interest rates, then expect USD volatility.