Sterling
The Pound suffered another drop-off in demand on Friday as traders reacted to news that the Northern Irish High Court had rejected a challenge to the legitimacy of the ‘Brexit’ vote. The ruling means that Northern Ireland will not be able to contest British Prime Minister Theresa May’s eventual decision to trigger Article 50 of the Lisbon Treaty. The Northern Irish case is different to a similar challenge that has been tabled to the English High Court in London, however, Friday’s ruling suggests there is little chance of the English challenge being accepted.
Euro
The Pound to Euro exchange rate declined by around -70 pips on Friday as, admittedly minor, hopes of a ‘Brexit’ challenge were rejected by the Northern Irish High Court.
Data from the currency bloc showed that economic confidence in the Eurozone jumped from 104.9 to a 2016 high of 106.3 in October. Alongside an uptick in October’s private sector performance, the sturdy sentiment figures suggest that the Eurozone may be starting to gain momentum in the fourth quarter.
A separate report showed that German consumer prices accelerated from 0.7% to 0.8% in October, which could bode well for inflation expectations in the wider Eurozone economy. The single currency is liable to appreciate if inflation prospects rise, because higher price pressures could prompt the European Central Bank to begin tapering its quantitative easing programme.
US Dollar
Sterling lost ground against the US Dollar on Friday but recovered by the end of the London session.
The ‘Greenback’ was energised by some better-than-anticipated economic data. Third quarter gross domestic product came in at 2.9%, beating forecasts of 2.6% and marking a massive improvement on the previous quarter’s growth of 1.4%. A 10% jump in exports, the biggest rise since late 2013, contributed strongly the figure, as did an increase in business inventories. Although the robust print is not enough to force the Federal Reserve’s hand, most speculators believe the US central bank will opt to hike interest rates in December.
News that the FBI has launched a further investigation into Democrat presidential candidate Hillary Clinton’s use of private email servers, stymied demand for the US Dollar during the evening. The FBI probe hurt the ‘Greenback’ because it was seen to dent Clinton’s campaign, therefore increasing the chance of wild card Republican candidate Donald Trump taking charge of the White House.
Canadian Dollar
The Pound strengthened by around half a cent against the Canadian Dollar on Friday as rising Fed rate hike bets weighed on risk sentiment. The commodity-correlated ‘Loonie’ was also disadvantaged by rumours that the proposed OPEC deal to curb oil production may have hit a snag with Iraq and Iran allegedly unwilling to cooperate.
Australian Dollar
The Pound to Australian Dollar exchange rate remained mostly flat through Friday as risk assets were damaged by rising Fed hike expectations, while Sterling was hit by news that a ‘Brexit’ challenge had been thrown out of the Northern Irish Hough Court.
New Zealand Dollar
Sterling depreciated by around half a cent versus the New Zealand Dollar thanks to ‘Brexit’ concerns and nascent forecasts for higher interest rates in New Zealand. Having previously anticipated a rate cut from the Reserve Bank of New Zealand, markets are now starting to speculate that the RBNZ’s next move could be up, which has increased the appeal of the ‘Kiwi’ Dollar.
Data Released
09:30 GBP Mortgage Approvals (SEP) Medium 60.1k
10:00 EUR Euro-Zone Consumer Price Index – Core (YoY) (OCT A) High 0.8%
10:00 EUR Euro-Zone Gross Domestic Product s.a. (QoQ) (3Q A) Medium 0.3%
10:00 EUR Euro-Zone Gross Domestic Product s.a. (YoY) (3Q A) High 1.6%
12:30 USD Personal Spending (SEP) Medium 0.6%