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GBP stabilises versus EUR & USD
– Flat versus AUD & NZD.
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Sterling rebounds slightly against Euro
– GBP/EUR up from 11-month low.
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‘Cable’ close to five-year low
– Pound rallies minimally.
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Sterling rallies against ‘Loonie’
– Oil at 12-year low.
Sterling
The Pound inched higher against some of the majors yesterday after suffering significant losses towards the end of last week’s session. Demand for Sterling rose slightly against the Euro and the US Dollar as the Pound bounced from notable lows. The UK currency traded flatly against the ‘Aussie’ and ‘Kiwi’ as risk sentiment remained soft but not soft enough to cause further selloffs down under.
This morning’s most significant data releases are the UK industrial and manufacturing production reports which are tipped to show that industrial output increased 1.7% year-on-year in November but that manufacturing contracted -0.7%. The mixed bag is unlikely to propel Sterling higher.
Euro
The Pound to Euro exchange rate ticked higher by around a cent yesterday as traders locked in profit from last Friday’s 11-month low GBP/EUR print.
The single currency benefitted last week as risk aversion persuaded traders to settle high-yield investments that had been taken out with cheaply obtained European loans, thus pumping large sums of money back into the Euro. With oil prices at 12-year lows, copper – a notorious gauge of global sentiment – at seven-year lows and geopolitical concerns in the Middle East weighing on economic confidence there is every chance that the single currency could continue to be propped up by such reverse risk flows.
Sterling is down three cents on last week so there is room for a rebound higher but there is also potential for the Euro’s rally to resume.
US Dollar
‘Cable’ began the week on the front foot, appreciating by around 80 pips as profit taking stances drove GBP/USD higher from last Friday’s five-year lows. However, demand for the Pound petered out during the New York session and Sterling gave up most of its gains.
The latest plunge in copper prices to a new seven-year low confirms that investors’ appetite for risk has floundered at the start of 2016. The metal, dubbed Dr Copper, is often seen as an important measure of confidence and the latest fall follows the worst recorded first week of the year on financial markets. Equity markets shed -5% last week and the safe-haven appeal of the US Dollar looks set to trump the faltering rate hike prospects of the British Pound.
Canadian Dollar
Sterling appreciated by just under a cent against the Canadian Dollar yesterday as crude oil prices sunk below $32 a barrel for the first time in 12 years.
Further to concerns of oversupply, ‘black gold’ was impacted by fears that a declining Chinese Yuan could push the ‘Greenback’ higher and – because oil is priced in US Dollars – drive crude towards $20 a barrel. This speculation proved disastrous for the ‘Loonie’ because oil is Canada’s most lucrative export.
Australian Dollar
Sterling fluctuated in a two-cent range against the Australian Dollar yesterday but the Pound was unable to maintain its early momentum and the pair closed for the day without really getting anywhere.
Risk trends support further weakness in the Antipodean currency, however, soft BoE rate hike bets could weigh on GBP/AUD going forward.
New Zealand Dollar
Risk aversion and Chinese volatility brought the Pound to New Zealand Dollar exchange rate up to a three-week high at the beginning of the week, however, Sterling was unable to build on the
early momentum and BoE hike bets deteriorated as low oil prices were seen to erase inflationary pressures.
Data Released
09:30 GBP Industrial Production (YoY) (NOV) Medium 1.7%
09:30 GBP Manufacturing Production (YoY) (NOV) Medium -0.8%
14:15 GBP BOE’s Mark Carney Speaks in Paris High
15:00 USD JOLTS Job Openings (NOV) Medium 5425