Sterling
The Pound fell back yesterday, having rallied on Monday evening in response to Bank of England Governor Mark Carney’s decision to extend his stay at the helm of the bank by 12 months until 2019. Carney’s announcement calmed fears that he was being forced out due to political issues, which could have seriously undermined investor confidence in Sterling. However, the fact remains that the Governor will now be leaving just a matter of months after the UK’s proposed two-year divorce period with the European Union ends, therefore leaving the currency susceptible to speculators due to the added layer of uncertainty.
During yesterday’s session UK data printed sturdily but it was not enough to lift demand for Sterling. Manufacturing output printed at 54.3, down slightly from September’s score of 55.5, but still showing sanguine growth. Employment trends rose as firms expanded to meet rising demand from abroad due to the weaker Pound. However, Sterling’s depreciation did also have a negative impact, by pushing up import prices for raw materials and energy.
Euro
The Pound to Euro exchange rate tumbled by almost a cent yesterday as the Carney bounce evaporated before investors’ eyes like a ghostly apparition.
There were no key European ecostats to impact GBP/EUR trading patterns yesterday but it seems that broad weakness in the US Dollar dragged the single currency higher across the board (EUR/USD is the world’s most-traded currency pair, so movements are liable to have a knock-on effect on both the Euro and the ‘Greenback’).
Today’s session is set to see UK construction slow from 52.3 to 51.8, while German unemployment is tipped to remain at 6.1%. The data shouldn’t have a massive impact on GBP/EUR but it could put a little bit of pressure on the Pound.
US Dollar
‘Cable’ held flat yesterday as both Sterling and the US Dollar saw demand soften across the board.
Fears of a Donald Trump election victory appear to have weighed on the ‘Greenback’ in light of the FBI’s latest probe into Hillary Clinton’s private email servers. Clinton is seen as the status quo candidate, while Trump’s uncertain policy plans mean he is considered less market friendly.
Despite the drop-off in demand, yesterday was actually a decent day for US economic indicators. US factory output rose to a one-year high of 53.4, which drove December Federal Reserve rate hike expectations up to 73%. The Fed is unlikely to raise rates this afternoon but the US Dollar could rally if policymakers leave the door open to the expected piece of monetary tightening in December.
Canadian Dollar
Sterling softened by around a quarter of a cent against the Canadian Dollar yesterday thanks to robust Canadian GDP data, although comments from Bank of Canada Governor Stephen Poloz did throw GBP/CAD a lifeline later in the afternoon.
Annualised Canadian GDP rose from a downwardly adjusted 1.2% to 1.3% in August, it was reported yesterday, which sent the ‘Loonie’ higher versus most of the majors. However, GBP/CAD gave back some of its gains before the end of the day thanks to comments from BoC Governor Stephen Poloz suggesting that rates will not be raised to combat ballooning house prices, with Poloz stating that interest rates were a ‘very blunt tool’.
Australian Dollar
The Pound to Australian Dollar exchange rate declined by over half a cent yesterday thanks to the Reserve Bank of Australia’s announcement that it would not be altering interest rates in November. The RBA left rates on hold at 1.50%, noting that its growth and inflation forecasts were ‘little changed’ from three months previously.
New Zealand Dollar
Sterling stumbled against the New Zealand Dollar yesterday as demand for the Antipodean currency was improved by a sharp rise in dairy prices at the latest GlobalDairyTrade auction. Dairy is New Zealand’s most important export, so it was no surprise to see the ‘Kiwi’ Dollar rallying after whole milk powder prices spiked 19% and world dairy prices jumped 11%.
Data Released
08:55 EUR German Unemployment Rate s.a. (OCT) High 6.1%
09:30 GBP Markit/CIPS UK Construction PMI (OCT) Medium 51.8
18:00 USD FOMC Rate Decision (Lower Bound) (NOV 2) High 0.25%