Sterling
‘Hard Brexit’ fears continued to weigh on demand for the Pound yesterday even though domestic data printed positively.
The prospect of government officials entering Brexit negotiations with European leaders without a clear strategy, and without a strong desire to retain tariff-free access to the single market, has significantly reduced demand for Sterling this week. So, even though UK manufacturing production in November printed at 1.3%, smashing forecasts of 0.5%, the UK currency was unable to register any remarkable gains against the majors. Industrial production also impressed, at 2.0% compared to estimates of 0.6%.
Euro
The Pound to Euro exchange rate held relatively flat yesterday as Brexit anxieties prevented Sterling from rallying on upbeat production figures for November.
Responding to questions from the Treasury Select Committee, Bank of England Governor Mark Carney said that Brexit was no longer the most significant domestic risk to financial stability. However, question marks surrounding the UK’s future trading relationship with its biggest trade partner – the European Union – remained a severe negative influence on demand for the Pound. Carney also hinted that the bank would upgrade its forecasts for the UK economy later in the year but Sterling remained insensitive to the remarks.
US Dollar
Barring the ‘flash crash’ of October 7, when Sterling plunged to multi-year lows versus most of the majors and then bounced back within the hour, Sterling struck its weakest exchange rate versus the US Dollar for 31 years yesterday.
‘Cable’ declined by over a cent yesterday afternoon as a mixture of Brexit worries and bullish expectations for the US economy pushed GBP/USD lower. The Pound, however, managed to recover and then rally by around a cent during the evening following President-elect Donald Trump’s latest press conference.
Traders had expected that Trump would use the media address to lay out policy plans, which many hoped would feature information on fiscal stimulus projects. However, the Republican leader was forced to spend a lot of time rubbishing salacious media reports, which emerged earlier in the day, and failed to reveal any details regarding policy. Among other things, the unsubstantiated dossier suggested that Russian President Vladimir Putin had compromising information on Trump and claimed that, while in Moscow, the President-elect employed a group of prostitutes to urinate on a hotel bed that Barack Obama and his wife Michelle had previously slept in. The bizarre story prompted a spree of tweets using the hashtag #WaterSportsGate.
Canadian Dollar
The commodity-sensitive Canadian Dollar increased in value slightly against the Pound yesterday thanks to a 3% rise in the price of its most lucrative export. Crude oil surged 3% thanks to news that Saudi Arabia, the world’s top oil producer, had told customers it would be reducing crude supplies in February.
Australian Dollar
Sterling tumbled by around -130 pips yesterday to strike a new two-month low versus the Australian Dollar. Brexit anxieties remained a negative impact on the Pound, while the lack of information from Trump’s press conference helped the Australian Dollar. Trump’s anticipated bullish policies have weighed on the ‘Aussie’ since the US election, however, traders are now waiting for more concrete policy plans before making any further moves.
New Zealand Dollar
As is often the case, the New Zealand Dollar followed a similar path to the Australian Dollar versus the Pound yesterday. GBP/NZD declined by around -180 pips.
Data Released
10:00 EUR Euro-Zone Industrial Production w.d.a. (YoY) (NOV) Medium 1.5%
13:30 USD Initial Jobless Claims (JAN 7) Medium 255k