The main volatility of the week, perhaps, can be considered the movement of the pound sterling, which suffered from disagreements between the members of the MPC of the Bank of England: Mark Carney said that it is still too early to raise the interest rate, but the chief economist and some members of the Committee think quite differently.
Euro does not have enough food for economic thought
Having lost to the US dollar at the beginning of the week, after two consecutive sessions, against the background of speeches of bankers and members of the FRS, the euro managed to level out the greater half of the fall. The US dollar has lost against the background of the USA stock market collapsed after the oil.
The ECB report, released on Thursday, “spoiled” the picture, indicating the risks from Trump's economy and the danger of military conflicts. The report once again confirmed its commitment to the low interest rates and retention of asset purchase volumes.
The increase in European currency returned on Friday against the background of the growth in the business activity index of Germany and published results on France's GDP, which turned out to be higher than forecasts.
Bank of England split in opinions
The pound is being suffered from the political crisis that arose because of the majority's loss by conservatives after the early elections.
Speech of the Governor of the Bank of England, Mark Carney, who rejected the need to raise rates, the lack of agreement in the coalition of the ruling party, the transfer of speech in the Queen's Parliament led to a strong fall on Tuesday.
Nevertheless, contrary to the Governor, the speech of the chief economist and executive director of monetary analysis and statistics of the Bank of England Andy Haldane, who announced the inevitability of the rate raise, gave an impulse to the pound sterling's growth.
The reversal of the pound was supported by the Queen's speech in parliament and the Theresa May’s speech at the EU summit, who promised a guarantee of rights and freedom of movement for EU citizens after Brexit. According to the Prime Minister's promise, 3 million EU residents will be allowed to freely stay in on the territory of the United Kingdom on an ongoing basis.
According to the results of the week, it seems that Theresa May significantly has “softened” her statements, and there are significant disagreements on the rate increase in the Bank of England (by the way, Kristin Forbes (voting in MPC) also noted the need to raise the rate). In Nomura, they believe that the BA rate will be increased already in August.
Becomes more hawkish
The first half of the week passed in the flat state for the New Zealand’s currency, traders were waiting for an interest rate decision and the Wheeler's speech, the Governor of the Reserve Bank.
The retention of the interest rate at 1.75% and assurance of this state of affairs for a long time by the country's chief banker allowed NZD to become the best-growing currency against the dollar (among the major ones) this week. The Reserve Bank sounded less dovish and most likely remains in the neutrality of the monetary policy due to the weak GDP growth of the first quarter, although other indicators, especially inflation, support a more firm policy of the bank.
The protocol of the previous meeting of the Bank of Australia, published on Tuesday, did not contain any changes in the usual language, so the currency continued to decline against the background of a massive verbal attack by the FRS bankers, who continuously spoke for two consecutive sessions.
The decline in oil prices was an additional incentive for deepening the fall; the continent's currency is traditionally sensitive to the cost of energy.
The Canadian core retail sales index in April, which exceeded the analysts’ expectations twice, confirmed the fears of the Governor of the Central Bank about the increased inflation risks of the accelerated economy on Thursday.
The flow of positive macroeconomic news has provided the Canadian one with a steady trend for strengthening since early May. Friday’s data showed a slowdown in inflation, overnight wiping out traders’ hopes to tighten monetary policy by the Central Bank. Against the backdrop of the latest news on consumer price indices in May, worse than expected, this week ends with the victory of the US dollar.
CARetailSales [m / m] fact 0.8% (0.6%) against the forecast of 0.2%
CA Retail Sales - Core [m/m] 1.5% (0.8%) 0.7 %
CA CPI [m/m] 0.1% (-0.1%) 0.2 %
CA CPI [y/y] 1.3% (-0.2%) 1.5 %
Expected events of the coming week
Please note that the Janet Yellen’s speech will be on Tuesday.
Speech of Poloz, the Governor of the Bank of Canada will be on Wednesday, then the oil reserves data will be published, it seems that CAD volatility may be significant this day.
Thursday: the traders’ attention will be drawn to the data on the USA GDP for the I quarter. This is the third final release of GDP. As a rule, the deviation from the first two releases is insignificant, but it is worthwhile to keep an eye on it.
Friday will end the week with the UK GDP data for the first quarter (the final release, as well, the third in a row). In the afternoon, the Canada's GDP data will be published (it will be more interesting).