Pound Recovers Slightly Ahead of UK Industrial Production Data
Pound Sterling (GBP) exchange rates recovered some of last week’s losses at the start of this week’s session as traders breathed a sigh of relief that pressure on UK Prime Minister Theresa May appeared to calm somewhat.
And Sterling could post mild gains later today if UK data prints positively. The industrial production report for August is tipped to see annualised output grow from 0.4% to 0.9%, however, optimism could be curtailed by an expected -£11.2 billion trade balance deficit.
Theresa May Needs Brexit Progress to Boost Pound to Euro Exchange Rate
The Pound to Euro exchange rate inched higher by around half a cent yesterday as traders locked in profit from the three-week low that GBP/EUR hit at the end of last week’s session.
The potential for a cliff-edge scenario, whereby Britain formally leaves the EU without a new trade deal, remains a key concern for financial markets, however, the hope of mild progress in the Brexit negotiations re-entered the equation yesterday.
EU officials ruled out ‘miracles’ but, speaking under anonymity, suggested leaders could ‘offer an encouraging line to stay engaged’.
If some form of progress is made during this week’s talks then it could reduce a little bit of pressure on UK PM May and simultaneously lend the embattled Pound some support. Alternatively, another round of talks without a breakthrough could pile more pressure on Sterling.
Pound to US Dollar Exchange Rate Could Mount Meaningful Rally, But Not Just Yet
‘Cable’ recovered from a 1-month low yesterday, rising by around 70 pips in a relief rally. Technical analysis suggests GBP/USD could post a larger rally at some point over the next few weeks, but it’s too early to tell if immediate Sterling gains will be forthcoming at this juncture. In fact, robust US data and a hawkish shift in Federal Reserve rhetoric could pave the way to further strength in the ‘Greenback’.
If the UK can make it through October without a Tory leadership crisis or enough soft economic data to derail Bank of England rate hike prospects then we could see the Pound to US Dollar exchange rate gain momentum in November.
Indeed, the BoE appears likely to raise interest rates next month and this could prove a catalyst to further gains if officials at the central bank maintain a hawkish outlook.
Pound to Canadian Dollar Exchange Rate Rallies 90 Pips Despite OPEC Production Curb Rumours
Oil prices stabilised yesterday on hopes of further price action from OPEC. The cartel of major oil producing nations signalled that it was prepared to step up production curb efforts in order to help drive prices higher. However, the news did little to boost the commodity-correlated ‘Loonie’ against Sterling yesterday and GBP/CAD actually appreciated by around 90 pips.
How the pair trades during today’s session will largely depend on the morning’s UK industrial production report: a bad score could send Sterling reeling, while a positive print could give the UK currency the impetus for another leg higher.
Pound to Australian Dollar Exchange Rate Inches Higher Amid Bearish Shift in ‘Aussie’ Sentiment
The Pound to Australian Dollar exchange rate rallied by around 120 pips yesterday and could continue to strengthen in the medium term. Iron ore prices have slumped -23% over the past month and if this trend continues it could have profoundly negative consequences for the commodity-sensitive ‘Aussie’.
Meanwhile, the Antipodean currency is also at risk from an ever-reducing premium in interest rates. In 2011 US rates were at 0.25% and Australian rates stood at 4.75%, while the current climate sees US rates at 1.25% and Australian borrowing costs at 1.50%. If the Fed takes US rates inline with the Reserve Bank of Australia then it could lead to a massive outpour in capital and a significant dip in the ‘Aussie’ Dollar.
Pound to New Zealand Dollar Exchange Rate Rallies 100 Pips
Sterling strengthened by around 100 pips against the New Zealand Dollar yesterday and rising Fed rate hike bets could drive GBP/NZD to further gains over the coming weeks and months.
Data Released Today
09:30 GBP Industrial Production (YoY) (AUG)
09:30 GBP Manufacturing Production (YoY) (AUG)
09:30 GBP Visible Trade Balance (Pounds) (AUG)