Pound Sterling (GBP)
With quiet market trade yesterday as the US celebrated Thanksgiving, the Pound softened versus many of its peers despite an initially warm reaction to George Osborne’s autumn budget statement. The depreciation was the result of speculation that UK growth will slow and Bank of England (BoE) rate rises will be in very small increments when a hiking cycle eventually begins. On Friday morning, the Pound is holding a weak position versus all but commodity-correlated assets. The preliminary estimate for third-quarter Gross Domestic Product met with expectations of 0.5% growth on the quarter, with 2.3% growth on the year.
With European bonds predicted to be the hardest-hit by a Federal Reserve cash rate hike, the shared currency has dragged its heels over the past few days. Heightened speculation regarding policy easing from the European Central Bank (ECB) in December continues to weigh on demand for the common currency, although a better-than-anticipated Spanish Inflation Rate in November has seen the single currency edge higher versus many of its peers on Friday morning. Eurozone Consumer Confidence data, due for publication later on Friday morning, has the potential to provoke volatility for the Euro.
US Dollar (USD)
Whilst US citizens enjoyed the National Holiday of Thanksgiving, market trade was comparatively subdued yesterday. The US Dollar avoided significant depreciation, however, with the majority of economists predicting that the Federal Reserve will look to hike the cash rate in December. The likelihood of a Fed rate hike has been priced in by traders, with the US Dollar holding a high value. Historically, the US asset has cooled in the wake of a benchmark rate increase, but the current high value of the US Dollar could present a real problem with regards to growth prospects.
Australian Dollar (AUD)
The Australian Dollar continues to hold a weak position versus many of its peers after yesterday saw third-quarter Private Capital Expenditure contract by -9.2%. A massive drop in Chinese stock values and ongoing weakness in the commodities market is taking its toll, although the ‘Aussie’ (AUD) avoided larger depreciation on Friday thanks to slow US Dollar trade.
New Zealand Dollar (NZD)
Much like its Oceanic neighbour, the New Zealand Dollar declined versus its currency rivals in response to weak commodity prices and a 5.5% drop in the Shanghai Composite Index on Friday. Falling dairy prices continue to have a detrimental impact on demand for the New Zealand asset. Uncertainty regarding Reserve Bank of New Zealand (RBNZ) policy outlook is also having a negative impact on ‘Kiwi’ (NZD) demand.
Canadian Dollar (CAD)
Crude oil prices declined on Friday morning after October’s Chinese Industrial Profits contracted by -4.6%, which highlighted weakening demand from the world’s second-largest economy. This caused the ‘Loonie’ (CAD) to decline versus many of its peers, although losses have been somewhat slowed ahead of Canadian Industrial Product Price and Raw Material Price Index data.