Euro Rallies as Eurozone PMIs Beat Forecasts

Pound (GBP) Slips as UK Businesses Hit by Record High Costs 

The Pound (GBP) weakened on Tuesday as UK PMI data for November revealed record high input costs hit businesses, and supply chain snags and staff shortages limited growth.  

Sterling slipped despite the manufacturing and services readings bettering forecasts and indicated solid growth in both sectors, with new order growth at a five-month high.  

Comments from the Bank of England’s (BoE) Jonathan Haskel also failed to support the Pound. The policymaker reiterated the view inflationary pressures are transitory, but added interest rates will have to rise if the job market remains tight. 

Looking ahead, forecasts point to the CBI industrial trends orders data improving on last month’s six-month low, which may provide Sterling with modest support today. 

Euro (EUR) Buoyed by Surprise Eurozone PMIs 

The Euro (EUR) made gains across the board yesterday as Eurozone manufacturing and services PMIs for November both unexpectedly rose, indicating growth instead of slowing as forecast. 

However, data showed surging Covid-19 cases, supply chain issues, and soaring costs sent businesses confidence to a ten-month low, capping EUR gains. 

Turning to today’s session, the Ifo business climate indicator published this morning is expected to fall to its lowest levels since April as business sentiment continues to sour in the Eurozone’s powerhouse economy.  

US Dollar (USD) Firms in Line with Treasury Yields 

The US Dollar (USD) held its ground through Tuesday’s session as US Treasury yields firmed and supported the ‘Greenback’.  

News that Federal Reserve chair Jerome Powell is set to stay in the post for a second term reinforced expectations for rate hikes from the US central bank in 2022, bolstering USD. 

Before US markets close for Thanksgiving tomorrow, a slew of high-impact US economic data releases will drive USD movement today. The pick of the data will be durable goods orders for October, Federal Open Market Committee (FOMC) minutes, and the Fed’s preferred measure of inflation, the PCE price index for last month. 

Canadian Dollar (CAD) Rangebound as Oil Prices Rebound 

The oil-sensitive Canadian Dollar (CAD) traded in a narrow range on Tuesday despite the US announcing it would release 50 million barrels of its crude reserves. 

Attempts by major oil consuming nations to cool the market failed as the number of barrels they decided to release fell well short of expectations, prompting an oil price rally which may support the ‘Loonie’ through today’s session. 

Australian Dollar (AUD) Dented by NZD Contagion 

The Australian Dollar (AUD) dipped in overnight trade after getting caught by contagion of the New Zealand Dollar selloff.  

However, AUD exchange rates pared some its losses amid a slight improvement in market sentiment. 

New Zealand Dollar (NZD) Suffers Selloff Following RBNZ Rate Decision 

The New Zealand Dollar (NZD) dropped sharply overnight following the Reserve Bank of New Zealand’s (RBNZ) decision to raise interest rates to 0.75%. 

Some investors were disappointed having anticipated a more aggressive hike to 1%, while expectations for a more aggressive long-term cash rate projection also failed to materialise, triggering an NZD selloff. 

Andrew Roberts

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