Today’s Pound Sterling Headlines
Pound Sterling registers new gains – Brexit talks hopes lift the British currency.
GBP/EUR jumps 50 pips – Despite wary EU Brexit statement.
GBP/USD strikes September high – US President Trump controversy weighs on US Dollar.
GBP/CAD hits new 5-month high – UK manufacturing PMI on tap.
Pound Sterling Exchange Rates Continue to Strengthen on Brexit Talks Hopes
The British Pound registered further gains across the board yesterday in anticipation of a breakthrough in Brexit talks.
The recent appreciation in Sterling reflects growing optimism that EU officials will accept Britain’s improved Brexit divorce settlement terms and give the go ahead for the negotiations to progress to future UK-EU trade.
However, nothing has been confirmed yet and the Pound could easily suffer significant losses if EU sentiment sours.
Considering how high Sterling has rallied versus some of the majors, it’s not inconceivable that we could see the Pound dip slightly on profit-taking, even if the British government does reach an accord with the EU.
This morning’s UK manufacturing PMI is tipped to show that growth remained stable in the factory sector during November. An expected score of 56.5 is likely to have a mildly positive impact on demand for the Pound.
Pound to Euro (GBP/EUR) Exchange Rate Hits Monthly High as Eurozone CPI Disappoints
An underwhelming Eurozone consumer price index score helped Sterling register a monthly high versus the single currency yesterday.
The Pound rallied by around a quarter of a cent versus the Euro as investors reacted to a 1.5% Eurozone inflation print, which was lower than market expectations of 1.6%.
In better news for the currency bloc, unemployment tumbled to a nine-year low of 8.8%, which is actually the region’s long-term average.
The Czech Republic (2.7%), Malta (3.5%) and Germany (3.6%) boasted the lowest rates, while joblessness remained high in Greece (20.6%), Spain (16.7%) and Italy (11.1%).
The single currency barely reacted to the announcement, probably because analysts are primed for prolonged monetary easing from the European Central Bank due to the region’s stubbornly low rate of inflation.
Pound to US Dollar (GBP/USD) Exchange Rate Hits September High as Trump Controversy Weighs on ‘Greenback’
The Pound to US Dollar (GBP/USD) exchange rate strengthened by around 70 pips yesterday to hit its highest level since September.
Brexit progress speculation fuelled the rally in ‘Cable’, while the ‘Greenback’ also appeared to suffer in response to dark mutterings that US President Donald Trump is planning to sack Secretary of State Rex Tilerson and replace him with CIA Director Mike Pompeo.
The political turbulence weighed on the US Dollar because it was seen to create more uncertainty for Trump’s administration.
Having said that, progress appears to have been made on the President’s proposed tax reform, and this could benefit the US Dollar going forward.
Pound to Canadian Dollar Exchange Rises to 5-Month High Ahead of Canadian GDP Report
Despite a nine-month extension to the OPEC and non-OPEC production cuts, which should help prop-up oil prices through 2018, demand for the Canadian Dollar remained soft yesterday and GBP/CAD rose 140 pips to strike its highest level for over five months.
We could see further movement in the pair this afternoon, when Canadian unemployment is tipped to drop from 6.3% to 6.2% and annualised GDP is expected to slip from 4.5% to 1.6%. The anticipated cooling of Canadian growth could well put negative pressure on the ‘Loonie’.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Hits Highest Level Since Brexit Vote
The Pound to Australian Dollar (GBP/AUD) exchange rate jumped 100 pips to reach its strongest level since the week of the Brexit referendum yesterday.
Sterling’s recent appreciation hinges on the expectation that Britain will convince the EU that sufficient progress has been made on the Brexit divorce bill to start discussing future trade in the coming weeks.
If theses expectations are disappointed GBP/AUD could swiftly give back its recent gains.
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Appreciates 270 Pips
Registering rapid gains of around 270 pips, the Pound to New Zealand Dollar also reached a peak not seen since the week of the Brexit vote yesterday.
The ‘Kiwi’ appeared to suffer a drop in demand following data showing that domestic business sentiment was sliding. The ANZ business outlook showed that 39% of firms were pessimistic about the year ahead, which was the lowest level since the start of 2009.
If economic activity does in fact slump in 2018 it could pave the way for further weakness in the New Zealand Dollar.
Data Affecting Today’s Pound Sterling Forecast
09:30 GBP Markit UK PMI Manufacturing s.a. (NOV)
13:30 CAD Quarterly Gross Domestic Product Annualized (3Q)
13:30 CAD Unemployment Rate (NOV)
15:00 USD ISM Manufacturing (NOV)