Sterling
The Pound drifted broadly higher across the board yesterday thanks to some soothing comments on Brexit.
UK Chancellor Phillip Hammond told reporters that the government was considering paying into the EU budget in exchange for access to the single market – something Brexit minister David Davis spoke of last week. And Prime Minister Theresa May conceded that she would reveal her Brexit plan to parliament before invoking Article 50 of the Lisbon Treaty. The concession boosted investor sentiment because it was seen as another step towards maintaining single market access, which is generally viewed as a good thing for the British economy.
Euro
The Pound to Euro exchange rate plateaued for most of yesterday’s session as the single currency received a slight boost from an unexpected upgrade to Eurozone GDP.
The currency bloc reported annual growth of 1.7% in the third quarter, which beat predictions of 1.6%. This morning’s European data is anticipated to show that German industrial production accelerated from 1.2% to 1.6% during October, which could also prove supportive to the single currency.
Although the UK Supreme Court is not expected to rule on the government’s Brexit appeal until the New Year, the Pound ticked higher versus some of its currency peers yesterday in response to a flurry of market moves. Traders were betting on the government’s appeal being overruled, therefore forcing Downing Street to seek parliamentary ratification before it can officially begin the process of exiting the European Union. If this proves to be the case then we could see a little bit of upward momentum in Sterling.
US Dollar
‘Cable’ struck a new two-month high yesterday afternoon, however, Sterling then ran into heady resistance and GBP/USD plunged swiftly by around -100 pips.
An expected December rate hike and hopes of further monetary tightening from the Federal Reserve in 2017 mean that the US Dollar is performing well across the board at the moment. The Pound is actually one of the only currencies not nursing large losses versus the ‘Greenback’ over the last few weeks. With the Pound to US Dollar exchange rate still trading close to two-month highs, there is every chance that profit-takers will start eroding into GBP/USD’s recent gains between now and the New Year.
Yesterday’s US data saw durable goods orders smash expectations of 3.4% with a robust print of 4.6%, while factory orders jumped from 0.6% to 2.7%, further bolstering the appeal of the world’s premier reserve currency.
Canadian Dollar
Sterling initially strengthened versus the Canadian Dollar yesterday on hopes of a soft Brexit, which were stoked by soothing comments from UK Chancellor Phillip Hammond and PM Theresa May. However, demand for the ‘Loonie’ rebounded later in the session. This afternoon the Bank of Canada is expected to leave interest rates on hold at 0.5% and some investors are looking for a shift in sentiment away from future rate cuts due to Canada’s sturdy GDP rates and the recent rise in oil prices. The ‘Loonie’ bulls hope that the recent OPEC production cut deal will prevent any further easing from the BoC.
Australian Dollar
The Pound to Australian Dollar exchange rate softened slightly yesterday as markets digested the latest policy announcement from the Reserve Bank of Australia. The RBA left rates on hold at 1.5%, as expected, but Governor Philip Lowe made a number of remarks about rising house prices, which some analysts interpreted as priming for a potential rate hike some time in 2017.
New Zealand Dollar
The Sterling to New Zealand Dollar exchange rate held fairly steady yesterday as upbeat Brexit sentiment was met by a rise in New Zealand dairy prices. Milk prices increased for the fourth time in a row at yesterday’s Global Dairy Trade auction and the 3.5% rise helped attract demand for the commodity-sensitive ‘Kiwi’ Dollar.
Data Released
GBP UK Supreme Court Hears Government-Parliament Brexit Appeal High
09:30 GBP Industrial Production (YoY) (OCT) Medium 0.5%
15:00 CAD Bank of Canada Rate Decision (DEC 7) High 0.50%