Pound (GBP) Sentiment Dented by Chancellor’s Statement
The Pound (GBP) slumped in Thursday’s European session, as Chancellor Jeremy Hunt’s Autumn Statement inspired volatility as expected. The Office for Budget Responsibility (OBR) forecast a year long recession and predicted that living standards in the UK would fall by 7%.
Later in the afternoon, however, Sterling recovered some of its losses. It may be that investors subsequently considered the statement’s more positive elements: the National Living Wage is going up by almost £1 an hour and benefits are rising to match price pressures.
Retail data may dictate GBP movement today: sales improved by more than expected in October, lending support to the Pound. Sterling trended higher overnight against the majority of its peers.
Euro (EUR) Ticks Down Following Inflation Release
The Euro (EUR) sank against the majority of its peers in the early European session yesterday, following the Eurozone’s finalised October inflation release. While the reading was marginally below initial estimates, it nevertheless showed that prices continued to rise in the year to October.
In the afternoon, the single currency managed to recover some of its losses, possibly on account of rising rate hike bets. The European Central Bank (ECB) maintains a dovish tone, however, with support for a 75bps interest rate rise seeming scarce amongst policymakers.
This morning’s speech from Christine Lagarde may lend support to the shared currency if the central bank’s President strikes a more hawkish tone. So far, the head of the ECB has confirmed that the bank expects to implement further rate hikes.
US Dollar (USD) Buoyed by Data, Fed Outlook
The US Dollar trended broadly higher on Thursday as the Federal Reserve’s James Bullard gave a hawkish speech. Furthermore, initial jobless claims fell last week by more than expected.
As US inflation was revealed to have slowed last month, support for the ‘Greenback’ dived on fears the Fed would begin to ease off aggressive rate hikes. Dispelling such fears yesterday, Bullard said the US central bank must persevere given that tightening so far ‘had only limited effects on observed inflation’.
Additional Fedspeak in today’s session could influence USD further, given a lack of significant domestic data.
Canadian Dollar (CAD) Firms despite Weaker Oil Prices
The Canadian Dollar (CAD) traded up against several peers yesterday, defying commodity-linked pressures as crude oil continued to soften.
Today, the rate of producer price inflation in Canada is expected to have fallen on an annualised basis. If the data prints as expected, the currency may push lower.
Australian Dollar (AUD) Trades Mixed on Softer Risk Tone
The Australian Dollar (AUD) wavered against its peers overnight, subdued by a risk-off impulse and the ongoing dovish stance of the Reserve Bank of Australia (RBA). Covid-19 woes in China and geopolitical tensions elsewhere act as a headwind to the risk-sensitive currency.
New Zealand Dollar (NZD) Trends Higher Overnight
The New Zealand Dollar (NZD) climbed against several of its rivals overnight, potentially buoyed by economists’ opinion that the currency is rebounding. ANZ experts predict an improved growth outlook in China which should be good for commodities, boosting the ‘Kiwi’.