Sterling
The Pound rose versus most of the majors yesterday. British data showed that consumer credit increased by £1.6 billion in September, bringing annual credit growth to an 11-year high of £1.6 billion. Mortgage approvals also outperformed, accelerating from 63,600 to 67,500.
However, it seems that the main driver behind Sterling’s rise – which did peter out during the evening somewhat – was a cutback in short positions against the UK currency. Data from the Commodity Futures Trading Commission showed that bets against the Pound tumbled to their lowest level since September last week.
Euro
The Pound to Euro exchange rallied by around a cent during the morning yesterday. However, GBP/EUR fell back -75 pips by the end of play, to mark a 25-pip daily gain, as long-standing psychological resistance kicked in.
Sterling has struggled to surpass resistance at 1.18 over this past week, but GBP/EUR remains around eight cents stronger than it was midway through October. The shift in Bank of England policy expectations away from further stimulus appears to be boosting the Pound, while the single currency is suffering from projections of additional monetary easing from the European Central Bank.
On top of this, the Euro is feeling the force of market jitters due to concerns that rampant populism could destabilise the European project over the next 12 months. Sunday’s Italian referendum, which could see Prime Minister Matteo Renzi resign if he is defeated, is the first obstacle. Elections in Germany and France next year are also on the radar.
US Dollar
‘Cable’ surged by almost a cent yesterday as markets cut short positions against the Pound, suggesting that the post-‘Brexit’ depreciation may have run its course.
Data Stateside showed that the world’s largest economy expanded at an annualised rate of 3.2% in the third quarter, up from the first estimate of 2.9%. The two-year high print equated to quarterly growth of 0.8%, which markedly outpaced the UK’s Q3 score of 0.5%, thanks to rising consumer spending trends and stronger export growth. Markets are now pricing a 99% chance of an interest rate hike from the Federal Reserve in December, however, the US Dollar was unable to post any gains versus the Pound following the upbeat GDP report.
Canadian Dollar
Sterling strengthened by around 130 pips versus the Canadian Dollar yesterday as oil prices tumbled on negative news from the OPEC meeting in Vienna.
Oil slid -3.5% on news that Iran was calling for Saudi Arabia to cut production by 1 million barrels per day, so that it would not have to reduce output at all. The impasse suggests that OPEC members may struggle to clinch a deal and this hurt the commodity-correlated ‘Loonie’ because crude is one of Canada’s most lucrative products.
Data this afternoon is tipped to show that annualised Canadian GDP accelerated from 1.3% to 1.8% in September, however, the Canadian Dollar could struggle if OPEC members remain at loggerheads.
Australian Dollar
The fall back in global oil prices weighed on risk sentiment slightly yesterday, which contributed to Sterling’s one-cent gains versus the Australian Dollar. The Pound also benefitted from a cutback in investor bets against the UK currency, which appeared to relate to the BoE’s new neutral outlook for monetary policy.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate ticked higher by around a cent yesterday morning but the pair gave back all of its gains by the end of the day.
Data Released
10:00 EUR Euro-Zone Consumer Price Index Estimate (YoY) (NOV) High 0.6%
12:30 EUR ECB’s Mario Draghi Speaks in Madrid High
13:30 USD Personal Consumption Expenditure Core (YoY) (OCT) High 1.7%
13:30 CAD Gross Domestic Product (YoY) (SEP) High 1.8%