Headlines
• UK manufacturing output rises in September –
NIESR says UK GDP expands 0.6%.
• GBP/EUR rises on NFP report –
Pound up 80 pips.
• US Dollar rallies on Fed rate hike bets –
Thanks to glittering labour market numbers.
• Canadian unemployment dips in October –
Sterling up vs. commodity bloc.
Sterling
It was reported on Friday that British manufacturing output rose by 0.8% in September, marking the fastest month of growth since April 2014. The upbeat print doubled the median market forecast of 0.4% but sentiment towards Sterling did not improve massively because industrial production came in softer at -0.2%, down from +0.9% in August.
During the afternoon the National Institute of Economic and Social Research (NIESR) released a report estimating that the British economy accelerated from 0.5% to 0.6% in the three months to October. This had a mildly positive impact on the Pound.
Euro
Sterling jumped higher by 80 pips against the Euro on Friday afternoon in response to a much better-than-anticipated US labour market report, which was seen to greatly increase the probability of an interest rate hike from the Federal Reserve in December. Markets took to selling the single currency following the data because higher interest rates in the world’s largest economy will likely lead to a tightening of lending conditions throughout the global economy.
However, some analysts argued that the single currency could benefit from the rise in US rate hike bets because it could persuade the European Central Bank to refrain from loosening monetary policy in the Eurozone before the end of the year.
US Dollar
The Pound to US Dollar exchange rate stumped by -150 pips to strike a six-month low on Friday as markets reacted to a glittering US non-farm payroll report by bolstering their Fed rate hike bets and buying into the ‘Greenback’.
The headline October NFP score came in at an outstanding 271,000, massively overwhelming expectations of 180,000 and marking a significant improvement on September’s score of 137,000. Markets were also buoyed by an unexpectedly sharp jump in wages from 2.2% to 2.5% and a surprise dip in the unemployment rate from 5.1% to 5.0%.
Overall the upbeat labour data was seen as a bullish signal for the US Dollar and the large majority of market analysts now anticipate a rate hike from the Federal Reserve in December.
Canadian Dollar
The Pound remained fairly flat against the Canadian Dollar on Friday despite the risk aversion trends that plagued other commodity-linked currencies following the robust US NFP report. The ‘Loonie’ did decline when the US jobs data was released but demand for the Canadian Dollar swiftly ticked higher as investors digested a positive Canadian labour market report, which saw unemployment unexpectedly fall from 7.1% to 7.0%.
Australian Dollar
Sterling appreciated by around a cent against the Australian Dollar on Friday as global risk sentiment weakened following the stronger-than-anticipated US jobs report. The risk-sensitive ‘Aussie’ was also damaged by data released over the weekend signalling that Chinese imports contracted -18.8% during October, which was seen to augur badly for trade between the two nations. And because China is the largest buyer of Australian exports the data was seen as a strong bearish signal for the Antipodean currency.
New Zealand Dollar
The Pound rose by over half a cent against the New Zealand Dollar on Friday as markets prepared for a likely tightening of monetary policy in the United States in December. The upbeat NFP report led many traders to believe that the Fed will indeed raise interest rates next month and perceived riskier assets such as the ‘Kiwi’ depreciated as a result.
Data Released Today
09:30 EUR Euro-Zone Sentix Investor Confidence (NOV) Medium 13.1