Australian confidence dips, but do does unemployment…falling fall

What to look out for this week

• Busy week for UK and US economic data

• Brexit back in the spotlight as negotiations made official

• US interest rates up

• Australian confidence dips, but do does unemployment...falling fall

 

Currency market overview

One year on from the Brexit vote – what's next?

We now know that the Brexit negotiations will officially start on Monday, 19th June. Following preliminary discussions in Brussels and a vocal EU calling for negotiations to begin, Brexit Secretary, David Davis, has confirmed the start of the official talks next week.

The UK is due to leave the EU by the end of March 2019 – see our Brexit timeline for a list of key political and trade discussions that are due to take place over the two-year period.

More big discussions from the Bank of England

The Bank of England threw the cat among the pigeons on Thursday, as three of the eight Monetary Policy Committee members voted in favour of an interest rate increase. This could mean that, although rates stayed the same this time around, they could be creeping up in the near future. Sterling slid back down after enjoying a brief boost.

An unexpectedly strong UK Consumer Inflation number gave traders all the ammunition they needed yesterday to take profit on the Pound's post-election slump and that caused a mini-rally in Sterling. A cent of gain against the Euro and about the same against the USD gave Sterling back some of its composure, but it is still pretty weak. Talk of a soft Brexit, a weakened UK negotiating position and those rough, tough EU negotiators abounds.

The biggest increase in UK inflation for four years caught the markets off guard.

Sterling strengthened a little on improving jobs growth figures, but it was weighed down by poor wages growth data and the surprise rise in inflation.

The Euro is struggling against the Pound after disappointing data, despite overall confidence. A flurry of key economic data for the US, including Retail Sales and Inflation figures, came out below par. Initially, this weakened the US Dollar, but the US currency bounced back following the interest rate hike announced at the Federal Open Market Committee (FOMC) meeting. Janet Yellen, Chair of the Federal Reserve, mentioned the falling inflation in her speech, stating that they would be keeping a close eye on the economy and the short-term influences on the markets. Markets still expect at least another interest rate increase in 2017. With this in mind, all eyes will be monitoring the performance of the US Dollar closely.

Australian Dollar shrugs off economic events and stays steady

The GBP-AUD rate fell as Australian business confidence fell for May 2017, but after the trading break for the Queen's Birthday, it got back up to the level it was at the start of the week. At the same time, unemployment has fallen in Australia, to the lowest it has been for more than four years. This, alongside chatter of a potential Reserve Bank of Australia interest rate cut dying down, helped boost the Australian Dollar.

Surprise slip for the New Zealand Dollar

New Zealand Gross Domestic Product (GDP) saw only 0.5% growth quarter-on-quarter for the first quarter of 2017, below the 0.7% forecast. The new Zealand Dollar is still the second strongest of the major currencies this month, but dropped a little overnight on this news.

And I'll leave you with the weather forecast for this week, because it seems summer is finally here...

It's gonna be hot, hot, hot for most of the UK this week; mostly sunny, hot and humid – particularly in the south – with average highs of 25-29°C. I wonder how many dads rushed out to B&Q/Homebase/Claus Ohlson for that top of the range BBQ at the weekend?

[Disclaimer: there are many other shops where you can buy a BBQ and this is not an endorsement]

In all seriousness, folks, stay safe in the sun and heat this week, it's going to be a scorcher! A public health warning has been issued, but there's no need to panic – just be sensible. Stay hydrated, protect your skin, find shade and don't try to overdo it in the heat. That last bit is easier said than done, granted...