Sterling
The Pound failed to make any meaningful gains versus the majors yesterday as UK Prime Minister Theresa May refused to commit to giving parliament a vote on the final Brexit deal. May indicated that she would be outlining the government’s negotiating approach in the New Year and hinted that Downing Street would be open to a transitional deal to allow businesses to ease their way into the world of post-Brexit trading regulations. However, on the whole the PM’s speech was seen as bearish for the Pound because of her comments on parliamentary ratification. Investors would prefer to see MPs vote on the eventual Brexit deal because it is believed that this will increase the likelihood of the government agreeing to retain access to the single market, which is seen as positive for British economic prospects and stability.
Euro
The Pound to Euro exchange rate held relatively steady yesterday, softening slightly during the afternoon in response to UK PM May’s comments on Brexit.
Today’s session is expected to see Eurozone consumer confidence print at -6.0, which is unlikely to give the single currency any kind of positive boost.In Britain, trade figures are anticipated to show that the government was forced to borrow around £11.6 billion in November to balance the books. Overall, the soft ecostats will probably even each other out, meaning that any GBP/EUR movements will probably be driven by Brexit speculation.
US Dollar
Sterling declined by around -40 pips to hit a monthly low against the US Dollar yesterday despite upbeat UK retail data showing that sales volumes increased at the fastest pace since September 2015 over the last few weeks. The Confederation of British Industry’s (CBI) index surged from +26 to +35, indicating that UK consumers stuck to the task during the US-style Black Friday sales period in the run-up to Christmas.
However, ‘Cable’ failed to take advantage of the strong retail numbers – most likely because traders instead opted to focus on PM Theresa May’s reluctance to discuss British parliament voting on the government’s final Brexit trade deal with the EU. Across the pond there were no significant data prints but demand for the ‘Greenback’ remains sturdy following last week’s Federal Reserve rate hike and hawkish policy statement.
Canadian Dollar
The commodity-sensitive Canadian Dollar grabbed an 80-pip daily gain versus the Pound yesterday as demand for the ‘Loonie’ was buffeted by rising oil prices. Crude ticked higher by around US$1 per barrel in response to bets that US crude stockpiles were beginning to soften. The ‘black gold’ recently hit a 17-month high following deals between OPEC and non-OPEC nations to reduce output in 2017, which also gave the Canadian Dollar a bit of a boost.
Australian Dollar
Sterling stumbled a little bit versus the Australian Dollar yesterday. Demand for the ‘Aussie’ was bolstered by the latest Reserve Bank of Australia minutes report, which indicated that the Federal Reserve’s recent decision to hike rates – which in turn has led to a depreciation in the value of the Australian Dollar – may have prevented the need for the RBA to lower borrowing costs. The RBA noted that a lower exchange rate could help the domestic economy transition away from raw-material exports but policymakers appeared comfortable to let the hawkish Fed do the legwork for the time being.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate weakened a little bit yesterday following UK PM Theresa May’s comments on Brexit. However, Sterling could have suffered steeper losses had it not been for the first drop in New Zealand dairy prices at auction since October. Dairy prices slid -0.5%, following four consecutive hikes. The big item for ‘Kiwi’ traders to look out for today is the New Zealand Q3 growth report, which is tipped to see GDP slow from 0.9% to 0.8%. Anything higher could boost the ‘Kiwi’, while anything lower could benefit GBP/NZD.
Data Released
09:30 GBP Public Sector Net Borrowing (Pounds) (NOV) Medium 11.6b
15:00 EUR Euro-Zone Consumer Confidence (DEC A) Medium -6.0
21:45 NZD Gross Domestic Product (QoQ) (3Q) Medium 0.8%