Sterling
The Pound remained largely unchanged versus most of the majors yesterday, drifting minimally lower from Wednesday’s post-budget statement highs.
Despite lower forecasts for growth and a £122 billion black hole in Britain’s public finances, Sterling surged across the board on Wednesday following Chancellor Phillip Hammond’s Autumn Statement. Traders were cheered by the Chancellor’s announcement that £23 billion would be spent on infrastructure and innovation over the next five years to help boost productivity. Government Gilt yields rose in response to the largest intra-year increase in debt issuance since 2008, which also boosted the Pound by making UK debt more profitable to foreign investors.
Euro
The Pound to Euro exchange rate traded close to two-month highs throughout the day yesterday but failed to build on Wednesday’s gains.
UK data printed positively, with mortgage approvals rising from 38,700 to 40,900, beating forecasts of 39,000, but traders were reluctant to take GBP/EUR any higher considering the significant levels of economic uncertainty relating to Britain’s decision to leave the European Union.
Across the Channel, the German business climate IFO index remained sturdy at 110.4, suggesting that German business leaders were not fazed by the shock US Presidential election victory for Donald Trump earlier this month. However, a German GDP print of 0.2% showed that growth cooled to its lowest level for a year during the third quarter.
US Dollar
‘Cable’ ticked higher by around 20 pips yesterday as US-based traders focussed on Turkey dinners and family feuds rather than the potential for Trump’s reflationary policies to drive Federal Reserve rate hike expectations higher. The Thanksgiving Holiday thinned trading conditions and allowed Sterling to sneak a mild set of daily gains versus the ‘Greenback’.
The main event to keep an eye on today is this morning’s UK GDP report, which is tipped to confirm that the British economy managed a respectable 0.5% expansion in the third quarter – especially Impressive considering the uncertainty surrounding the ‘Brexit’ vote.
Canadian Dollar
The Pound to Canadian Dollar exchange rate stroked a nine-day high yesterday before leveling out during the afternoon. Technical analysis suggests that there is scope for Sterling to appreciate by a further seven cents versus the ‘Loonie’ over the next few months, so long as no new ‘Brexit’ fears break the GBP/CAD uptrend.
Australian Dollar
The Pound dropped back by around half a cent against the Australian Dollar yesterday, however, the potential for Sterling to maintain upward momentum versus the ‘Aussie’ remains due to the apparent hawkish outlook of the Federal Reserve. If, as is widely expected, Trump’s reflationary policy plans drive US inflation expectations higher and prompt a flurry of Fed rate hikes, then we could see global risk trends cool as liquidity dries up.
New Zealand Dollar
Sterling briefly struck a seven-week high versus the New Zealand Dollar yesterday as risk aversion remained a key theme in global markets due to expectations of tighter lending conditions over the next few years in the world’s largest (the US) economy.
Data Released
09:30 GBP Gross Domestic Product (QoQ) (Q3)PRELIMINAR 3 0.5%