Pound Sterling Exchange Rates Unstable Following Autumn Budget
Pound Sterling (GBP) exchange rate broadly softened in response to the UK’s Autumn Budget as Chancellor Philip Hammond announced negative revisions to the UK’s growth forecasts.
The national economy is now expected to grow by 1.5% in 2017 and 1.4% in 2018.
GBP fell by around 0.2% against the majors as the Budget was being delivered, but the Pound later recouped losses.
The budget outlined plans to scrap stamp duty for first time buyers and an increase in the national living wage. Hammond also asserted that an extra £3bn will be allocated to prepare for Brexit.
Today’s GBP Headlines
Pound Sterling supported by Brexit progress hopes – Autumn Budget could drive Sterling lower.
GBP/EUR exchange rate strikes weekly high – Political uncertainty in Germany weighs.
GBP/USD exchange rate flat ahead of Budget – Little volatility expected around Fed minutes report.
GBP/AUD exchange rate slides from 5-month high – RBA Governor speech potentially misinterpreted.
Brexit Hopes Support GBP Exchange Rates Ahead of Chancellor Philip Hammond’s Autumn Budget
Pound Sterling (GBP) exchange rates managed to avoid losses versus most of the majors yesterday, even though trade data showed the UK deficit widened by more-than-expected in October.
Sterling sentiment remained supported by speculation that British Prime Minister Theresa May is planning to offer an improved Brexit divorce bill offer, which some investors believe could open the door to discussing future trade and securing a transitional deal.
October’s -£8 billion deficit, which overshot expectations of -£7.1 billion, provided an unwanted headache for Chancellor Philip Hammond on the eve of his Autumn Budget and could further limit his spending power.
If the Budget features little in the form of economic stimulus and a downbeat assessment from the Office for Budget Responsibility (OBR), as expected, then it could prompt a bout of Sterling selling later this afternoon.
Pound to Euro (GBP/EUR) Exchange Rate Touches Highest Level in a Week
The Pound to Euro (GBP/EUR) exchange rate touched a new weekly high yesterday as hopes of progress in Brexit negotiations bolstered Sterling and concerns over political instability in Germany dragged on the single currency.
In an attempt to prevent the pain and wasted time of another general election, German President Frank-Walter Steinmeier has attempted to persuade political party leaders to reconvene coalition talks, following a shock breakdown in negotiations over the weekend.
However, it remains to be seen whether a coalition will emerge over the next few weeks and the Euro is likely to remain under pressure until the situation is resolved.
Interestingly, the uncertainty could also start to weigh on Sterling because difficulties at home are likely to prevent German Chancellor Angela Merkel from giving Britain any concessions in the Brexit talks.
Pound to US Dollar (GBP/USD) Exchange Rate Could Slide Following Autumn Budget
While the Pound to US Dollar exchange rate may witness a weak spell later today if the UK Autumn Budget features any unwanted downgrades to UK growth, trade or productivity, GBP/USD remained fairly sturdy through yesterday’s session.
A disappointing rise in the UK deficit was largely ignored by traders due to hopes of a Brexit breakthrough.
Also supporting the GBP/USD exchange rate was a robust UK factory report from the Confederation of British Industry, which saw new orders rise at the fastest rate since 1988.
The +17% increase seemed to reflect growing demand from abroad as a result of the Pound’s -15-20% depreciation since the Brexit vote.
Later this evening markets are likely to refrain from large moves following the November Federal Reserve minutes because traders are already extremely confident that the US central bank will hike rates in December.
Pound to Canadian Dollar Exchange Rate Loses -30 Pips as Oil Rises
The Pound pulled back from a three-week high versus the Canadian Dollar yesterday, softening by around a third of a cent as investors locked in profit.
The commodity-sensitive ‘Loonie’ was also boosted by a rise in oil prices and GBP/CAD could post further losses this afternoon if the US crude oil inventories print shows a drawback of -1.7 million barrels, as expected.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Slides from 5-Month High Following RBA Governor Speech
The Pound to Australian Dollar (GBP/AUD) exchange rate slid by around a cent yesterday as markets reacted to a speech from Reserve Bank of Australia Governor Philip Lowe.
It seems that markets actually overreacted to one element of the Governor’s speech because Lowe spent most of the time explaining that interest rates were unlikely to rise in the ‘near term’ due to soft wage growth and low inflation – an undeniably dovish message.
However, the Governor also mentioned that ‘it is more likely that the next move in interest rates will be up rather than down’ – a statement that was largely understood before the RBA chief’s speech and, in truth, should probably not have been taken as a hawkish signal for the ‘Aussie’.
Pound to New Zealand Dollar Exchange Rate Dips Ahead of New Zealand Retail Report
Sterling depreciated by around -80 pips versus the New Zealand Dollar yesterday despite news that the price of dairy, New Zealand’s most-lucrative export, had fallen -3.4% to an eight-month low.
It will be interesting to see whether the ‘Kiwi’ Dollar holds firm during today’s session, as retail sales are tipped to have cooled from 1.7% to 0.1% in the third quarter, which, ordinarily, would be expected to weigh on the New Zealand Dollar.
Data Affecting Today’s Pound Sterling Forecast
12:30 GBP U.K. Chancellor Presents Budget to Parliament
13:30 USD Durable Goods Orders (OCT P)
15:30 USD DOE U.S. Crude Oil Inventories (NOV 17)
19:00 USD FOMC Meeting Minutes (NOV 01)
21:45 NZD Retail Sales Ex Inflation (QoQ) (3Q)