Pound Sterling Rebounds on Hopes of Progress in Brexit Talks
Bank of England (BoE) Governor Mark Carney may have warned yesterday that Brexit was still the main threat to the UK economy, but markets were returning to the Pound after Wednesday’s bout of weakness.
Additionally, although the EU’s chief negotiator Michel Barnier suggested that trade discussions were still a long way away, markets took heart from the fact that progress did finally seem to be being made.
Strong Eurozone Confidence Softens GBP/EUR
Impressive Eurozone confidence data and solid German inflation helped slow the Pound’s advances yesterday. Consumer confidence held steady at -1.2, but the indices for economic, industrial and services confidence, as well as the business climate indicator, all significantly bettered forecasts.
Preliminary figures for September show that German consumer price growth remained steady at 0.1% on the month, and 1.8% on the year.
The Eurozone delivers two big datasets today; the German employment figures and Eurozone consumer price data for September.
GBP/USD Gains despite Strong US GDP Figures
America’s latest GDP data may have been impressive, but fears over the economic drag from hurricanes Harvey and Irma weighed on the US Dollar yesterday.
Annualised GDP was revised up to 3.1% during the second quarter – 10 basis points higher than earlier estimates. But the threat of this being cancelled out by a sluggish third quarter as the economy battles against the impact of the storms kept demand for the US Dollar cool.
US personal consumption expenditure figures are set for release today. This is the preferred measure of inflation used by the Federal Reserve, so signs of accelerating growth would help push odds of an interest rate hike in December higher.
GBP/CAD Strengthens after BOC Governor Warns of Moderating Growth
The Pound was on rocky form against the Canadian Dollar yesterday, but managed to recover some ground after Bank of Canada (BOC) Governor Stephen Poloz warned that the latest economic data pointed to a moderation of growth within the Canadian economy.
The BOC has recently raised interest rates twice, so markets and hoping this was the start of a prolonged tightening cycle. Based upon the governor’s remarks, this seems highly unlikely. GBP/CAD strength waned overnight, however.
Canadian gross domestic product figures for July will be released this afternoon.
GBP/AUD Firms on Lack of Australian Data
There were few developments yesterday to help boost the appeal of the Australian Dollar, which allowed the Pound to rebound from a bout of early-morning weakness and trend above opening levels until the evening. There was a lack of data on the calendar and a speech from Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle held little of interest for those looking for policy hints.
With big data releases coming from three of the major economies, the Australian Dollar may find itself in reactionary mode today.
Market Disappointment with RBNZ Meeting Commentary Boosts GBP/NZD
The Reserve Bank of New Zealand (RBNZ) held its latest policy meeting late on Wednesday night. Markets were disappointed by the downbeat tone of the post-meeting commentary, which confirmed that the RBNZ was a long way away from hiking interest rates. This allowed the Pound to make moderate gains although, like most Sterling pairings yesterday, this ground was ceded overnight.
Data Released Today
09:30 GBP Gross Domestic Product (YoY) (2Q F)
10:00 EUR Euro-Zone Consumer Price Index Estimate (YoY) (SEP)
10:00 EUR Euro-Zone Consumer Price Index – Core (YoY) (SEP A)
13:30 CAD Gross Domestic Product (YoY) (JUL)
13:30 USD Personal Consumption Expenditure Deflator (YoY) (AUG)
13:30 USD Personal Consumption Expenditure Core (YoY) (AUG)