Pound Sterling (GBP)
The Pound was initially trending strongly today after better-than-expected UK GDP figures. The latest data covers the period immediately before, during and after the EU referendum, finally giving a big-picture view of the economic impact of the vote. So far there appears to be little negative damage; although expansion slowed from 0.7% in the second quarter, the current 0.5% growth rate is better than the 0.3% predicted and in line with the average performance since the 2008 financial crisis. While those who supported Brexit are claiming this shows the referendum caused no adverse effects, other economists are warning that the economy won’t begin to feel the impact until the beginning of 2017 at the earliest. While GBP was briefly boosted by the GDP report, the currency later reversed gains.
The Euro is soft today but still managing to advance slightly against a number of its peers. The approach of key US data is keeping investors on hold, although a better-than-forecast dip in the huge 20% unemployment rate to 18.9% and a small rise in Italian business confidence is helping to keep some tailwinds behind the common currency. Also weighing on the markets, however, is the EU’s apparent failure to agree on the Comprehensive Economic and Trade Agreement (CETA) with Canada.
US Dollar (USD)
Federal Reserve December rate hike bets have climbed even higher in recent days, rising to over 78%. The US Dollar is soft today, however, due to the presence of key data on the calendar. Yesterday’s advance goods trade deficit narrowed to -$56.1b instead of edging higher to -$60.5b, while new home sales saw an upsurge of 3.1%, in an exact mirroring of the forecast change. Today’s preliminary September durable goods orders figure is expected to show growth remained at a steady 0.1% pace last month, the same as in August.
Australian Dollar (AUD)
The Australian Dollar is weakened by profit-taking today after yesterday’s strong inflation data lessened the odds of the Reserve Bank of Australia (RBA) returning to an easing bias. Strong US rate hike bets are keeping safe-haven demand firm, contributing to the ‘Aussie’ sell-off today. A -1% drop in import prices does not bode well for future inflation, as lower costs for distributors will drag down wholesale and shop prices. Meanwhile, Chinese industrial profit growth slowed markedly, dropping from 19.5% to 7.7%, which could pressure prices lower. Sentiment has also been hit by the news that the Treasury did little investigation into the impact of a proposed backpacker tax on the farming or tourism industry.
New Zealand Dollar (NZD)
Trade balance figures weakened the New Zealand Dollar yesterday, although the ‘Kiwi’ is making a tentative recovery this morning as investors buy the overly strong currency on the cheap. September’s trade deficit unexpectedly widened, climbing from -1265m to -1436m thanks to a 0.3b uptick in the total value of imports to 4.9b, while exports clocked in below-forecast at 3.47b. The year-to-date trade deficit, expected to tick higher to -3113m from -3109m instead rose to -3404m.
Canadian Dollar (CAD)
The Canadian Dollar is edging higher today as oil prices recover following the latest fears over the feasibility of a coordinated oil production cut. The Organisation of the Petroleum Exporting Countries (OPEC) is expected to agree to collectively reduce oil production when it meets next month, although markets remain jittery over the prospect of a cut actually materialising. While the ‘Loonie’ is making small gains against the majority of its peers, progress is being slowed by news that Prime Minister Justin Trudeau has cancelled his plans to attend an EU summit due to complications with the Comprehensive Economic and Trade Agreement (CETA). Trudeau had been scheduled to sign the deal today, but the EU have been unable to ratify the agreement due to disagreements between regional governments in Belgium.