Sterling
It was reported yesterday that UK industrial production slowed from 0.7% to 0.3% in September, but British sentiment was propped up by a surprise 0.2% jump in manufacturing output. Later in the day the National Institute of Economic and Social Research (NIESR) announced that British GDP growth is estimated to have decelerated from 0.5% to 0.4% during October.
However, given the precedence of ‘Brexit’ related news over economic data at this juncture – not to mention the uncertainty of an election between two of the least popular US Presidential candidates of all time – the Pound was largely insensitive to the day’s data releases. Furthermore, it’s unlikely that this morning’s UK trade deficit data will impact Sterling in any kind of significant manner.
Euro
The Pound to Euro exchange rate fluctuated with little directional bias during the day yesterday.
Tuesday’s most significant ‘Brexit’ news saw British Prime Minister Theresa May affirm her commitment to starting the two-year divorce process with the European Union by the end of March next year. The recent High Court ruling, which stipulates that the British government needs parliamentary ratification before it can trigger Article 50 of the Lisbon Treaty, which fuelled speculation that the PM may have to delay triggering the ‘Brexit’ clause until a later date. However, PM May stated yesterday afternoon that the March ‘timetable is still deliverable’. Markets were largely unmoved by the announcement.
However, during the early hours of this morning, GBP/EUR tumbled over half a cent as news came in that Donald Trump had won the US Presidential election.
US Dollar
With most traders betting on a victory for market-friendly Democratic candidate Hillary Clinton, rather than wildcard Republican nominee Donald Trump, throughout the day yesterday there were little decisive moves in GBP/USD.
The consensus view among speculators, of a Clinton victory, was heavily priced into the market on Monday when the FBI acquitted Clinton of any criminal activity regarding her use of private email servers while serving as Secretary of State.
HOWEVER, during the night it quickly became apparent that America had voted for Trump to become its 45th President. The Republicans also took the Senate and the House of Representatives, which in theory, opens the door for Trump to pass policy unhindered. The initial market reaction saw ‘Cable’ rally by almost two cents, but that knee-jerk move was reversed by the start of the London session.
Going forward it seems that we could see GBP/USD post gains over the next few days as uncertainty rattles financial markets. But in the long term, Trump’s hawkish outlook and ability to pick the next Governor of the Federal Reserve in 2018 could prove supportive for the ‘Greenback’.
Canadian Dollar
A sharp -7.0% decline in Canadian building permits was not enough to lift the Pound versus the Canadian Dollar during the day yesterday. The commodity-correlated ‘Loonie’ rallied by around 80 pips during the London session as oil prices and risk appetite rose on expectations of a status quo Clinton victory.
This trend reversed during the night, however, with GBP/CAD rising five cents at one point to strike a monthly high. The Pound has since bounced lower versus the ‘Loonie’ but the potential for another rally exists.
Australian Dollar
The Sterling to Australian Dollar exchange rate tumbled by around a cent during the day yesterday as risk sentiment improved on hopes of a loss for protectionist US Republican candidate Donald Trump. The belief that Trump, who intends to heavily tax imports and therefore reduce global trade flows, was going to lose the 45th US Presidential election helped drive the risk-sensitive ‘Aussie’ up towards highs rarely seen versus the Pound over the last three-and-a-half-years.
These moves were reversed during the night as news of Trump’s victory starting coming in. GBP/AUD strengthened by around six cents at one point on risk aversion trends, but the Pound settled for daily gains of around 120 pips.
New Zealand Dollar
During the London session GBP/NZD sank close to an all-time low as risk appetite flourished in anticipation of a Clinton victory. Indeed, the Pound reached its lowest level ever, bar the unexplained flash crash of October 7, versus the ‘Kiwi’ Dollar yesterday even though the Reserve Bank of New Zealand is tipped to slash interest rates -25 basis points from 2.00% to 1.75% later this evening.
However, the surprise victory for Donald Trump sent GBP/NZD higher by around five cents during the night and the Pound to New Zealand Dollar exchange rate settled around a cent up on the day.
Data Released
09:30 GBP Visible Trade Balance (Pounds) (SEP) -£11300
20:00 NZD Reserve Bank of New Zealand Rate Decision (NOV 10) (NOV 10) 1.75%