Sterling
It was reported yesterday that the British government was forced to borrow £12.2 billion last month to balance the books. The large figure surpassed economists’ forecasts of £11.6 billion and means that the UK’s national debt hit a new all-time high of £1.655 trillion. However, the data does mean that Chancellor Phillip Hammond is on track to hit his new softened 2016-17 fiscal targets, with borrowing -£7.7 billion less than it was at this point last year.
If Britain’s finances are to stay on track next year, when the economy is likely to slow, it is crucial that tax receipts continue to grow. VAT receipts were up 4.4% compared to November last year and corporation tax intake was a whopping 22.9% higher. However, over the month tax receipts did slip -1.1%, which could hamper economic sentiment if the slide continues.
Euro
The Pound to Euro exchange rate tumbled by around half a cent yesterday afternoon as traders responded positively to a better-than-anticipated Eurozone consumer confidence report. Reduced trading frequency accentuated the single currency’s mild gains.
The consumer sentiment print came in at a 20-month high of -5.1, beating calls for a score of -6.0. It was the fourth consecutive month that confidence improved in the currency bloc and this gave traders the impetus to send the Euro higher. However, the single currency could be fraught with uncertainty in 2017 with political uncertainty looking to be a big concern. General elections in Holland, France and Germany could put pressure on the Euro if investors start to see signs of anti-EU sentiment rising on the continent.
US Dollar
‘Cable’ remained close to one-month lows yesterday as the US Dollar continued to benefit from the Federal Reserve’s latest announcement.
On a trade-weighted basis the ‘Greenback’ is currently fluctuating close to 14-year highs and it’s all because of the Fed’s decision earlier in the month to raise interest rates and predict a further three hikes in 2017. So long as traders don’t get jittery when Donald Trump is sworn in as President in January, or at any time after that, then the US Dollar is likely to be the runaway winner on the currency markets next year.
However, we could see Sterling fight back during the afternoon if, as anticipated, US durable goods orders print negatively at -4.5%.
Canadian Dollar
The Pound to Canadian Dollar exchange rate ticked a little higher yesterday afternoon following news that US crude supplies rose unexpectedly over the last week. The US Energy Information Administration reported that, contrary to hopes of a -2.5 million drop, oil inventories increased by 2.3 million barrels in the week to December 16. The news, which was seen to suggest that the global supply glut is still an important issue, pushed crude prices lower and subsequently sent the commodity-sensitive ‘Loonie’ lower too.
The Pound could post further gains this afternoon if market predictions of a slowdown in Canadian inflation from 1.5% to 1.4% are proved accurate.
Australian Dollar
Sterling fluctuated with little conviction against the Australian Dollar yesterday as trading volumes thinned out ahead of the Christmas Holidays. GBP/AUD remains around a cent off its highest level for three months.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate held onto gains of around half a cent yesterday. The latest New Zealand GDP report showed better-than-anticipated growth of 1.1% during the third quarter. However on an annual basis the economy expanded 3.5%, which undershot expectations of 3.6%. GBP/NZD initially tumbled when the figures were release but the ‘Kiwi’ gave up its gains within 15 minutes of the print.
Data Released
13:30 USD Gross Domestic Product (Annualized) (3Q T) Medium 3.3%
13:30 USD Durable Goods Orders (NOV P) High -4.5%
13:30 CAD Retail Sales (MoM) (OCT) Medium 0.3%
13:30 CAD Consumer Price Index (YoY) (NOV) High 1.4%