Sterling
There was little news of any consequence to Sterling yesterday, and as a result US Presidential election bets proved the most important factor in most currency pairs.
The Pound received a significant boost last week when the UK High Court ruled that Prime Minister Theresa May would need parliamentary ratification before invoking Article 50 of the Lisbon Treaty to begin the formal process of leaving the European Union. Investors are now more confident that Downing Street may opt to retain access to the single market in order to get the ‘Brexit’ deal through parliament and this shift in outlook has boosted the appeal of the UK currency.
Euro
The Pound fell back slightly versus the single currency yesterday but the move lacked conviction and will not be remembered for long. The key data release of the day from Sentix showed that investor sentiment in the currency bloc rose to a yearly high of 13.1 in November, thanks to increases in revenue expectations that could bode well for fourth quarter growth.
Later today we have UK industrial production data, which is tipped to see output rise 0.8%. But the manufacturing section of the report, which is expected to see output contract -1.0%, could pare optimism.
US Dollar
The Pound to US Dollar exchange rate tumbled by over a cent yesterday on news that Democratic candidate Hillary Clinton has been cleared by the FBI of any criminal activity in her use of private email servers while serving as Secretary of State between 2009-2013. The announcement sent the ‘Greenback’ soaring as bets of a market-friendly Clinton victory increased. Maintaining the status quo is key for the US Dollar as a victory for protectionist Republican candidate Donald Trump could easily persuade the Federal Reserve not to raise interest rates in December.
To illustrate how important the FBI’s decision to clear Clinton of criminal wrongdoing is, the CBOE volatility index fell -17.8% on the day yesterday, which is the biggest intraday slump since June of this year.
The vote will take place today, with the results likely to be released in the early hours of Wednesday morning.
Canadian Dollar
Sterling tumbled by around two cents versus the Canadian Dollar yesterday as risk appetite was boosted by the positive news for Hillary Clinton’s US Presidential election campaign. Demand for the commodity-correlated ‘Loonie’ was also bolstered by a 1.5% rise in crude prices, due to renewed hopes that the world’s major oil producers will agree on a deal to drive oil prices higher this month. Sentiment improved following remarks from OPEC Secretary-General Mohammed Barkindo reaffirming the cartel’s commitment to forcing through a coordinated deal.
Australian Dollar
The Pound to Australian Dollar exchange rate slid by around -250 pips yesterday as risk assets rose inline with hopes of a market-friendly Clinton victory. However, the ‘Aussie’ could well find itself depreciating next month if, as investors predict, the Federal Reserve opts to raise interest rates 25 basis points in December. Markets currently anticipate a 78% chance of a Fed rate hike next month.
New Zealand Dollar
Sterling devalued by around -150 pips against the New Zealand Dollar yesterday as global risk aversion trends softened and the high-beta ‘Kiwi’ was able to rally.
Data Released
09:30 GBP Industrial Production (YoY) (SEP) Medium 0.8%
09:30 GBP Manufacturing Production (YoY) (SEP) Medium -1.0%
USD US Presidential Elections (All Day) High