Sterling
The Pound strengthened across the board yesterday thanks to comments from junior ‘Brexit’ minister David Jones suggesting that both houses of parliament would get the chance to examine the government’s post-‘Brexit’ trade deal. The news hammered home the point made last week by a High Court lawyer, that any new EU trade deal would need to be ratified by parliament. Sterling rose in response to the development because parliament is seen as desiring a ‘soft Brexit’, whereby Britain would retain access to the single market, which most traders believe would benefit the domestic economy.
The big event on the calendar today is the third quarter UK GDP report, which is tipped to see quarterly growth slow from 0.7% to 0.3%. Anything above zero will probably prevent Sterling suffering any large losses, however, the potential for substantial gains appears somewhat muted – even if the figure smashes forecasts.
Euro
The Pound to Euro exchange rate rose by around a third of a cent yesterday as ‘Brexit’ anxieties cooled slightly in response to news that Britain’s new EU trade deal will not escape the scrutiny of parliament.
Demand for the single currency was also hit by a leaked European Central Bank statement suggesting that it was all but certain that the bank would extend its QE programme past the projected end date of March 2017. The ECB source said that the bank would loosen the rules on what kind of bonds it could buy to ensure that the programme continues. The news weighed on the Euro because some traders had speculated in recent weeks that the ECB was considering slowing its asset purchasing scheme due, among other things, to a scarcity of bonds.
US Dollar
Sterling appreciated by just under half a cent against the US Dollar yesterday thanks to hopes that a so-called ‘hard Brexit’ could be averted by a vote in parliament.
Federal Reserve rate hike bets were bolstered by upbeat US service sector data but it was not enough to prevent Sterling stealing a rare day of gains versus the buoyant US Dollar. Markit’s October PMI report signalled that output jumped by more-than-expected from 52.3 to 54.8. The sturdy report marked the best score since November last year and was seen to equate to annualised domestic growth of around 2.0%.
The biggest US ecostat to look out for this afternoon is the durable goods print, which is tipped to rise 0.1%. Anything higher could easily boost Fed rate hike expectations, while anything lower could create a little dovish doubt.
Canadian Dollar
Sterling rallied by just under a cent versus the Canadian Dollar yesterday despite a surprise fall in US crude stocks. The latest EIA report showed that inventories declined by -553,000 barrels last week, however, oil prices remained down on the day due to doubts over OPEC’s ability to agree on a deal to curb oil output next month.
Australian Dollar
The Pound to Australian Dollar exchange rate plunged -150 pips during the early hours of the morning yesterday in response to some impressive Australian CPI numbers.
The Australian inflation index rose unexpectedly from 1.0% to 1.3%, which was seen to reduce the possibility of a near-term rate cut from the Bank of Australia. However, GBP/AUD fought back during the London session and actually ended the day around 50 pips stronger than it began.
New Zealand Dollar
The Pound managed to claim daily gains of around 80 pips versus the New Zealand Dollar yesterday as markets reacted favourably to news that Britain’s eventual EU trade deal will be examined by both houses of parliament before it is officially ratified. This raised hopes that Britain could retain access to the single market.
Data Released
09:30 GBP Gross Domestic Product (QoQ) (3Q A) Medium 0.3%
09:30 GBP Gross Domestic Product (YoY) (3Q A) High 2.1%
13:30 USD Durable Goods Orders (SEP P) High 0.1%