Sterling
The biggest item of news relating to the Pound yesterday was an interesting speech from Bank of England policymaker Gertjan Vlieghe. The BoE official, who has previously been a strong advocate of stimulus to help soothe the impact of ‘Brexit’, said he was happy with the current level of monetary accommodation and that it was best for the UK economy to leave rates on hold. Demand for the Pound did not increase massively following the remarks but the very fact that Vlieghe’s sentiments now appear less dovish could help Sterling in the long run if another rate cut is avoided.
Vlieghe also used the analogy of an umbrella being a consequence, not a cause, of rain to explain how low interest rates have not exacerbated muted inflation levels:
‘Umbrellas together with rainfall are observed in many countries. Nobody actually believes that umbrellas cause rainfall.’
Euro
The Pound to Euro exchange rate lost a little bit of ground yesterday but comments from European Central Bank President Mario Draghi suggest that the ECB is considering ways to bolster its expansive asset purchasing scheme in the near future.
Draghi said that the bank’s policymakers would ‘assess the various options [of preserving] the very substantial degree of monetary accommodation necessary to secure the sustained convergence of inflation towards (target)’. Last week a rumour emerged suggesting the ECB may delay announcing new measures until the New Year. While yesterday’s remarks did not shed new light on the timing of any new moves, they did indicate that some form of additional stimulus is probably forthcoming, which could depress demand for the single currency.
US Dollar
Sterling failed to gain ground against the US Dollar yesterday, despite the comments from BoE policymaker Gertjan Vlieghe suggesting that UK interest rates do not need cutting. Overall, GBP/USD softened by around half a cent yesterday.
The main event for traders of ‘Cable’ to keep an eye on today is this afternoon’s third quarter US GDP report. The growth print is anticipated to confirm that the world’s largest economy chugged along at an annualised pace of around 3.0% between July-September. The ‘Greenback’ could garner additional support on the day if, as expected, US consumer confidence breaks through into triple figures. The consumer sentiment index is projected to rise from 98.6 to 101.3.
Canadian Dollar
The Pound to Canadian Dollar exchange rate shed around two cents yesterday in reaction to optimistic comments from Iraqi oil minister Jabar Ali al-Luaibi regarding the proposed OPEC deal to curb production and drive oil prices higher.
Dodging a broken vase, which was knocked over in the melee of journalists approaching the oil minister for a quote, Ali al-Luaibi sent oil soaring 2.6% with his simple remark:
‘We are optimistic. We hope we (will) have agreement. We will cooperate with OPEC members to reach agreement acceptable to all’.
Australian Dollar
The commodity-correlated ‘Aussie’ also benefitted from the jump in crude oil prices, which stoked wider themes of risk appetite. The Australian Dollar appreciated by around 170 pips versus the Pound yesterday, helped by both the OPEC deal optimism and a report from the OECD forecasting stronger global growth this year and next. The OECD report featured an upgrade to 2017 GDP of 0.1%, which subsequently buoyed demand for commodities produced in Australia, such as iron ore and coal.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate also tumbled by around a cent-and-a-half yesterday due to renewed strength in commodity markets. The risk-sensitive ‘Kiwi’ is often lifted by upticks in global risk sentiment, and this was the case once more during yesterday’s session.
Data Released
09:30 GBP Mortgage Approvals (OCT) Medium 65.0k
13:00 EUR German Consumer Price Index (YoY) (NOV P) High 0.8%
13:30 USD Gross Domestic Product (Annualized) (3Q S) Medium 3.0%
15:00 USD Consumer Confidence (NOV) High 101.3