Headlines
• UK mortgage data on tap –
House purchases set to increase.
• GBP/EUR hits lowest level since May –
Despite EU farm subsidy payment.
• ‘Cable’ close to 4.5-month low–
Fed’s Dudley talks of October rate hike.
• Commodity bloc down on China concerns –
CAD, AUD & NZD decline vs. Sterling.
Sterling
The Pound remained soft against the Euro and US Dollar yesterday but managed to eke out some gains against the commodity bloc of the Canadian, Australian and New Zealand Dollars.
Later this morning economic data is expected to show that mortgage approvals rose by 1,000 to 69,800 in August and that the Confederation of British Industry’s (CBI) index of retail sales increased from 24 to 28. The sanguine data is unlikely to give Sterling a massive boost in confidence but it could halt the Pound’s declines versus the single currency and the ‘Greenback’.
Euro
Sterling fell by around a cent to its lowest level since May against the Euro yesterday as technical trading patterns took the single currency higher during the afternoon.
Today’s schedule appears to favour the Pound, with a couple of decent British figures on tap and German inflation expected to fall from 0.2% to 0.1%. However, most people expected the ‘super blood moon eclipse’ to pass on Sunday night without much consequence but yesterday afternoon NASA announced there was evidence of flowing water on Mars. Now this isn’t to say that the blood moon has anything to do with there being life on Mars but just a reminder that it’s impossible to predict what’s going to happen A) in this world, B) in space and most pertinently C) in foreign exchange markets.
Even though GBP/EUR is currently close to its lowest level since April there is potential for the Pound to recover in the run-up to the EU’s Common Agricultural Policy (CAP) Single Farm Payment (SFP) subsidy, which is estimated to see around €3.3 billion changed into Sterling.
US Dollar
‘Cable’ traded close to a four-and-a-half-month low yesterday as Federal Reserve policymaker William Dudley built upon Chairwoman Janet Yellen’s platform of positive rate hike sentiment.
Last week Yellen said that inflation was on target to hit 2.0% over the next two years and hinted that interest rates would probably rise by the end of the year and yesterday Dudley added that US rates could even rise as early as October, rather than the market consensus of December.
Data-wise it was announced that US personal jumped higher by 0.4% in August and that pending home sales increased by 6.7%.
Canadian Dollar
The Pound to Canadian Dollar rallied by around 70 pips yesterday as investors shunned the risk-correlated ‘Loonie’ in reaction to the latest sign of slowdown in China.
In the early hours of the morning it was reported that Chinese industrial profits plunged -8.8% in August, which marked the weakest performance for the manufacturing sector since 2011. In addition to the commodity bloc of currencies with strong exposure to the mining industry, commodity miner Glencore was a severe casualty yesterday, suffering stock losses of around -30%.
Australian Dollar
Sterling appreciated by around 150 pips against the Australian Dollar yesterday as investors cut their exposure to perceived riskier assets that are closely linked to the cooling Chinese giant. Although recent consumer spending and house building reports suggest that the Australian economy is beginning to rebalance there is still a long way to go before global investors change their perception of Australia as a proxy for China, because of the Antipodean nation’s reliance on China as an importer for its mining exports.
New Zealand Dollar
The Pound rose by just under two cents against the New Zealand Dollar yesterday as global risk sentiment waned in the face of further signs of a slump in China, the world’s second biggest economy and a huge buyer of New Zealand exports.
Data Released Today
09:30 GBP Mortgage Approvals (AUG) Medium 69.8k
11:00 GBP CBI Reported Sales (SEP) Medium 28
13:00 EUR German Consumer Price Index (YoY) (SEP P) High 0.1%
15:00 USD Consumer Confidence (SEP) High 96.0