USD: Will this week’s Fed speeches raise the odds for one last interest rate hike in 2016?

The US dollar finished last week lower as investors digested the Federal Reserve’s decision to not raise interest rates at last Wednesday’s meeting. Fed members also presented a lukewarm economic growth forecast for the US and planned fewer interest rate hikes than most analysts had anticipated for 2017, which put even more downward pressure on the US currency.

The greenback is stumbling into this week as investors continue to weigh the Fed’s hesitation to raise rates. On Tuesday we’ll see July’s US home price data, as well as the most recent consumer confidence, service sector and manufacturing activity readings. Wednesday will bring August’s durable goods orders data as well as several Federal Reserve member speeches, which could reflect the central bank’s view on the US economy and its attitude toward raising interest rates in December (which would in turn increase the US dollar’s value). Thursday morning will be busy with another reading of Q2 GDP growth and August’s trade balance data and pending home sales results, while a mid-afternoon speech from Fed Chair Yellen will follow. The week will be capped off on Friday morning with personal spending and consumption readings for August and the latest Chicago purchasing manager index data.

EUR: Reams of employment and inflation data will test the euro’s momentum this week

The euro enjoyed one of its best rallies since Brexit last week thanks to a relatively weaker US dollar combined with stronger-than-expected manufacturing activity out of France, Germany and the broader Eurozone. The Eurozone region continues to show resilience three months out from June’s Brexit vote, which has helped European Central Bank President Mario Draghi see less need for more currency-diminishing stimulus measures.

The shared currency is carrying its momentum into this week with Monday’s strong business confidence readings out of Germany and ECB President Draghi’s comments that the central bank plans to keep its stimulus levels steady to help the Eurozone economy. Tuesday will be light with some of Germany’s import price data, Italy’s industrial sales data from July, and the Eurozone’s private loan growth readings for August. We’ll see consumer confidence surveys out of Germany, Italy, and France followed by another speech from Draghi on Wednesday morning. Thursday will bring heavier data with Germany’s unemployment and consumer inflation data, as well as several business sentiment readings out of the broader Eurozone. It will be a busy Friday too with German retail sales results and a string of consumer inflation/spending data and employment numbers out of France, Italy, Greece, and the broader Eurozone. If the results from this week signal anything less than a resilient Eurozone, the chances for more central bank stimulus could go up and therefore weaken the euro.

GBP: Will strong lending activity help the pound recover from its two-week slump?

The pound ended lower for a second straight week against the US dollar after British foreign secretary Boris Johnson suggested last Thursday that the UK could make a swifter-than-expected break from the European Union. Johnson told Sky News that British leaders plan to pass Article 50 (the official EU separation legislation) in early 2017 to officially exit the EU by early 2019. The shorter time frame for the actual Brexit event added to the uncertainty around the UK’s trading agreements and put downward pressure on the pound.

Sterling is starting this week out steady as mortgage approvals grew less than expected for the month of August. Tuesday should be light with just a distributive trades survey out in the morning, while Thursday will show August’s consumer credit and more mortgage approval activity. Friday will round out the week with individual lending stats for August and more revised Q2 GDP growth and business investment results. With analyst expectations for the UK set low since June’s Brexit vote, better-than-anticipated results out of this week’s data could help the pound recover from its two-week slump.

CAD and AUD: Could zig with oil prices and zag with the US dollar

The Canadian dollar recovered last week as oil prices rose 4% to just above $46 per barrel, even though Friday’s disappointing retail sales and consumer inflation results pared the currency’s gains somewhat. This week we’ll see Bank of Canada Governor Poloz speak on Monday night with no other data to follow until Friday when July’s GDP readings and August’s raw material and industrial product price data come out. Aside from those reports, oil prices could again be the most significant driver of the Canadian dollar in the week ahead.

The Australian dollar also had a strong run last week against the Fed-weakened US dollar as investors were more optimistic that the Reserve Bank of Australia’s inflation targets would be met. The Aussie dollar also got a boost from China’s stronger-than-expected housing price growth (China is Australia’s largest trading partner). We’re heading into another light week for data, with just a speech from RBA Assistant Governor Edey on Tuesday evening followed by the latest new home sales data and July’s private sector credit activity to come out on Thursday night. With just a sprinkle of new data out this week, the Aussie dollar may continue to mostly move in the opposite direction of the US dollar.