The Sterling pound crashed earlier today after the release of disappointing UK retail sales data. The country witnessed a slump in retail sales during the Festive season in December, which shocked both analysts and investors. Most analysts expected British retail sales to expand slightly, or at the very least to remain flat, instead of a posting a 0.6% decline.
The pound's crash was accelerated by widely held expectations that the Bank of England was on track to cut interest rates later this month. An interest rate cut would signal that the BoE's monetary policy committee is worried about the UK's future growth prospects. The looming Brexit and the upcoming trade talks with the EU starting in February also weighed on the pair given the hard-line positions taken by both the EU and Boris Johnson.
With the recent tragedy hitting Australia, this has majorly affected their economy. With the agriculture industry being heavily affected, many were choosing to sell the Australian dollar in anticipation of a fall in this currency. And, they seemed to be right as we saw the AUD fall and risks of a rate cut rise.
The amount of damage done will cost billions to the economy, but also the reduction in retail spending and tourism will likely fall, a key aspect in the growth of Australia.
However in the last week the situation has began to ease and we have seen some buying in the AUD but we still expect a rate cut and therefore a further drop in the currency.
The start of the week was a poor start for the Canadian Dollar as it weakened against the US dollar. Oil prices have a big effect on Canada and as their prices fell so did the CAD. Awaiting the results of the trade agreement also caused a risky environment to invest. Although with the phase 1 deal signed and completed it seems that the Canadian has started to pick up.
Going into the near future I believe that the USDCAD may begin to rise again as we see some positive data out of the US. I also feel that oil will start to fall off once more as the Iran situation has died down and there is less risk from the trade war.
With important news spreading throughout the world climate, there has been positives for the New Zealand economy as it has been performing strongly recently. This is in part down to the phase 1 deal being signed having a positive impact for them. Other reasons for the investment in the ‘kiwi’ include the housing market continuing to gain traction, as both the prices and sales are rising rising.
We are seeing some macro based hedge funds start to talk about building NZD long positions also.