Sterling
The Pound was on mixed form yesterday, weakening against many of the majors thanks to a subdued inflation outlook from the Bank of England (BoE). Markets had hoped that recent strong inflation data, coupled with better-than-expected ecostats in the wake of the referendum, would put the Bank back on a tightening bias. However the BoE claimed the unexpected strength of Sterling compared to its post-referendum lows would reign in price growth. This left the BoE firmly on a neutral policy bias, disappointing investors.
Only low impact CBI trends data is set for release today – the decline in total orders is expected to slow, but selling prices are predicted to edge marginally lower.
Euro
Eurozone PMIs may have suggested that the currency bloc economy had accelerated in the final three months of the year, but the Euro was on the decline yesterday. US Dollar strength and continued tensions over the Greek bailout weighed on the single unit. Investors may have been hoping that Greek Prime Minister Alexis Tsipras’ proposed Christmas bonus for low-income pensioners would get blocked by Parliament, but as the day went on it seemed increasingly likely the move would be approved. This increased the likelihood that an irate Eurogroup would suspend Greek debt relief measures.
US Dollar
The US Dollar index hit a 14-year high yesterday on the back of Wednesday evening’s Federal Reserve policy announcements. Markets had been fully expecting the 0.25% hike, but were pleasantly surprised to hear the Federal Open Market Committee (FOMC) had revised its projections for 2017 higher. Policymakers expect rates will be hiked three times in the coming 12 months, against earlier predictions of just two hikes. This surprise allowed the already bloated US Dollar to make further gains.
Canadian Dollar
A combination of falling crude oil prices and weak domestic data undermined the Canadian Dollar yesterday. As commodities like oil are priced in USD, a rising ‘Greenback’ lowers their value. This was threatening to push WTI Crude back below US$50 per barrel; a level oil has been unable to hold since the UK referendum result unsettled markets. Additionally, manufacturing unexpectedly declined in October instead of growth ticking mildly higher.
The only Canadian data on the calendar today is the international securities transactions figures.
Australian Dollar
Strong US Dollar rates may usually weaken riskier assets like the Australian Dollar, but yesterday saw the ‘Aussie’ gaining. This was thanks to the latest labour market data, which showed more than double the number of persons forecast entered work in November.
New Zealand Dollar
As well as the rising US Dollar, the New Zealand Dollar was also pressured lower by disappointing domestic ecostats yesterday. Manufacturing activity slowed, even though the fall to 54.4 from 55.2 still represented a strong score. The growth in value of all buildings slowed by more-than-forecast in the third quarter, growing 1.4% against predictions of 2.1% – a poor showing given the second quarter’s 5.5%.
Data Released
11.00 GBP CBI Trends Total Orders (DEC) -2
13.30 International Securities Transactions
13.30 USD Housing Starts (MoM) (NOV) -6.8%