Worse-than-Forecast Drop in UK Retail Sales Weakens Pound
The Pound was on miserable form yesterday after the latest UK retail sales figures showed a worse-than-expected fall on the month. Sales fell -0.7% and -0.8% including fuel in September; a month where consumers usually settle back into their normal spending patterns after splashing out over the summer holidays.
Also weighing on Sterling was a warning by credit ratings agency Moody’s that UK consumers were vulnerable to an interest rate hike – just two weeks before the Bank of England (BoE) is expected to raise borrowing costs.
UK government borrowing figures are set for release shortly and could weaken the Pound if the deficit widens further.
GBP/EUR Exchange Rate Weakens despite Deepening Catalonia Crisis
The Euro was largely on buoyant form yesterday, pressuring the GBP/EUR exchange rate lower. The common currency strengthened despite a deepening crisis in Spain, after the nation’s government signalled it was moving to impose direct rule on Catalonia; the region that recently declared that it would become independent in a few weeks’ time.
Eurozone current account figures are the final data release due this week.
GBP/USD Losses Softened as US Leading Indicator Slows
US jobless claims data may have proven better-than-expected, but markets were taken by surprise when the leading indicators fell for the first time in twelve months.
The indicators use current data to map the trajectory of the economy over the coming months, so a slow down here was not good news for those expecting the Federal Reserve to hike interest rates in December.
US existing home sales data this afternoon will help to firm the overall picture of the US economy; signs of weakening demand for housing would imply falling consumer confidence – an unwanted development given that the Fed is on the brink of another interest rate hike.
Sliding Oil Prices and US NAFTA Demands Allow GBP/CAD to Hold Opening Levels
The GBP/CAD exchange rate was able to hold onto opening levels yesterday. The US and Canada had just finished the fourth round of talks in the renegotiation of the NAFTA deal, with the US demanding that the Canadian government ends its subsidising and protecting of the domestic dairy industry.
This is a big ask, forcing the Canadian government to choose between decades-old economic policy and a free-trade deal with its North American neighbours. Crude oil prices were also on the decline, preventing the ‘Loonie’ from capitalising on GBP weakness.
Canadian consumer price growth data for September is set for release this afternoon. A rise is expected, which will help to further cool those lingering fears that the Bank of Canada (BoC) jumped the gun with its recent interest rate hike.
GBP/AUD Slumps as Australian Unemployment Falls
The Pound tumbled against the Australian Dollar, which was supported yesterday by strong labour market figures released early in the morning.
Employment rose by an above-forecast 15,000 in September, while the unemployment rate fell to 5.5%. Strong GDP, retail sales and industrial production figures from China – a major trade partner – also helped AUD to keep on rising.
Shock Coalition Puts NZ Labour in Power; GBP/NZD Soars
Despite losses against its other peers, the Pound was able to climb over 1.6% versus the New Zealand Dollar during yesterday’s session.
The ‘Kiwi’ had tumbled following the announcement by New Zealand First that it would form a coalition with New Zealand’s Labour party, ousting the National Party after nine years in power.
Markets worry what this means for the economy at a time when the Reserve Bank of New Zealand (RBNZ) is already being rather cautious with its monetary policy. Could interest rate cuts be incoming?
Data Released Today
09:00 EUR Eurozone Current Account s.a. (euros) (AUG)
09:30 GBP Public Sector Net Borrowing (Pounds) (SEP)
13:30 CAD Consumer Price Index (YoY) (SEP)
15:00 USD Existing Home Sales (MoM) (SEP)