Strong UK Q4 outlook boosts pound after Thursday tumble

Sterling bounced back on Friday, shored up by a strong reading from the latest services sector data.

Sterling bounced back on Friday, shored up by a strong reading from the latest services sector data.

The Pound starts this week on soft footing. GBP/EUR is currently flat at €1.1264, while GBP/USD is inching higher in the region of US$1.3083. GBP/AUD is also flat at A$1.7090, although GBP/NZD has climbed half a percent to NZ$1.8995. GBP/CAD is stagnant at C$1.6686.

The October services PMI followed the pattern of the week’s earlier manufacturing and construction indices to show a strong uptake in the rate of growth.

The pound was rebounding on Friday after having slumped on Thursday following a disappointing set of meeting minutes to accompany the Bank of England’s (BoE) rate hike.

The October services PMI followed the pattern of the week’s earlier manufacturing and construction indices to show a strong uptake in the rate of growth. Although economists warned that business confidence was still falling and that more inflation was in the pipeline, markets were cheered after the index jumped from 54.1 to 55.8.

The euro, meanwhile, was left on uncertain form as political tensions in Spain unsettled markets. Eight members of the now-deposed Catalonian government were remanded in custody. Spanish prosecutors are seeking a European arrest warrant for the region’s Prime Minister, Carles Puigdemont, who fled after declaring independence in response to Spanish threats of imposing direct rule.

President Donald Trump announced that he was appointing Jerome Powell to be the new Chair of the Federal Reserve in 2018 when Janet Yellen’s term expires. This was a safe pick from a market point of view, so the US dollar was largely unmoved by the announcement. On top of this, the latest labour data provided little reason to either buy or sell the US dollar.

Job creation was respectable but significantly under forecast and wage growth figures disappointed. This wasn’t enough to soften the enormous odds of a rate hike next month, but neither was it particularly encouraging.

Wise Money Market News

There was no notable data on the UK calendar today, leaving markets to focus on the long-term monetary policy outlook and dwell on the potential fallout of Brexit.

More finalised Eurozone PMIs, as well as investor confidence data, are set for release later. Individually, each of these low-impact releases is unlikely to cause much euro volatility, but the volume of data could serve to reinforce or undermine the overall picture of the Eurozone economy as one that is enjoying a robust recovery.

There is little on the US data calendar today; although the speeches of Federal Reserve officials Potter and Dudley will be of interest to the market, they are unlikely to provide significant support or damage to the prospect of a rate hike next month.

Pound Gains on news from Brexit Hearing

 

Yesterday the pound pushed higher in early trading following confirmation that UK inflation rose 0.2% in September against an expectation of 0.1% and pushing the year on year number to 1.0%.

Yesterday the pound pushed higher in early trading following confirmation that UK inflation rose 0.2% in September against an expectation of 0.1% and pushing the year on year number to 1.0%.

Later in the day further Brexit uncertainties actually played in the pounds favour. News from a hearing in the High Court indicated that the Brexit process was likely to be subject to ratification in parliament.

Although any vote is likely to take place after Article 50 is triggered it still leans the markets towards a softer Brexit and hence boosted the pound.

Wise Money Market News

Today the key focus will be on UK labour market data and with the economy resilient to the Brexit vote it is expected that the unemployment rate and earnings will remain unchanged at 4.9% and 2.1% respectively.

Later focus will turn to the US with housing market data due for release and set to follow a positive trend. In addition, we also have several Federal Reserve members speaking and their views will be scrutinized given a December rate hike is in the balance.

Later tonight we have the third and final presidential debate with Clinton currently ahead in the polls.

Pound soars on upbeat Bank of England comments

An optimistic set of monetary policy meeting minutes released by the Bank of England (BoE) yesterday at the conclusion of its latest gathering lit a fire under the pound.

An optimistic set of monetary policy meeting minutes released by the Bank of England (BoE) yesterday at the conclusion of its latest gathering lit a fire under the pound.

After making gains in the region of 1% versus all of its major peers, Sterling continues to see strong demand today. GBP/EUR is currently up 0.3% at €1.1268, with GBP/USD having risen by a commensurate amount to US$1.3438. GBP/AUD is performing slightly better, with gains of 0.4% taking the pairing to A$1.6805, although GBP/NZD has only moved up 0.1% to NZ$1.8545. GBP/CAD has risen in line with other pound pairings to strike C$1.6349.

Provided economic data continues to clock in broadly in line with the new trend, the minutes stated, the bank is likely to raise interest rates faster than the market is currently expecting.

On the face of it, the latest BoE Monetary Policy Committee (MPC) meeting seemed fairly pedestrian. No changes were made to interest rates or quantitative easing, and only the two usual suspects – Ian McCafferty and Michael Saunders – pushed for the committee to raise borrowing costs.

However, the meeting minutes revealed that the bank saw the UK economy as outperforming the forecasts set out in its latest Inflation Report, which was released in August. Provided economic data continues to clock in broadly in line with the new trend, the minutes stated, the bank is likely to raise interest rates faster than the market is currently expecting.

With some analysts suggesting that this may mean that the BoE hikes interest rates as soon as November, demand for the pound swelled.

Although the euro was unable to resist the pound’s advances, it is finding support elsewhere thanks to comments from European Central Bank (ECB) policymaker Bostjan Jazbec, who calmed fears that the central bank would react to stronger euro exchange rates by intervening to weaken the currency.

US dollar also found strong support yesterday, thanks to above forecast inflation data. The consumer price index rose 1.9% in August – an above forecast result that saw markets beginning to hope once again that there may be a third interest rate hike from the Federal Reserve this year.

Wise Money Market News

There is nothing on the UK data calendar today, but the pound is likely to remain in strong form as the aftermath of yesterday’s Bank of England meeting continues to have a positive effect.

It’s a quiet day for Eurozone data, with only the trade balance figures for July and labour costs for the second quarter set for release soon.

According to forecasts, the latest US data is likely to take the shine off yesterday’s strong inflation figures. Advanced retail sales growth is expected to have slowed in August, while University of Michigan confidence index is predicted to fall. This further improves the likelihood that the pound will be able to hold on to its gains during today’s session and end the week on a high note.

Pound soft after four year low for UK house price growth

In another sign that the UK economy is weakening, house prices grew at the slowest pace since August 2013 last month.

In another sign that the UK economy is weakening, house prices grew at the slowest pace since August 2013 last month.

Consumers won’t make big purchases if they aren’t confident in the health of the economy, so a fourth consecutive quarter of declining house prices has economists worried.

The pound softened yesterday after data released by Halifax showed that house price growth in the UK has slowed to its weakest rate in four years. Property prices increased 2.1% on the year, but in the three months to July were -0.2% lower than the three month period to April.

That marks the fourth quarter in a row in which house prices have declined on the previous three months. Consumers won’t make big purchases if they aren’t confident in the health of the economy, so a fourth consecutive quarter of declining house prices has economists worried.

Eurozone data wasn’t positive either, but GBP/EUR still weakened. German industrial production posted a shock decline on the month of -1.1% – a slowdown from 1.2% growth to 0.2% had been predicted.

Additionally, the Sentix investor confidence index for the Eurozone weakened from 28.3 to a three-month low of 27.7.

However, because Friday’s US jobs data caused the euro to plummet, there was room for EUR to recover and this drove it higher, with markets ignoring the domestic data.

A speech from Federal Reserve official James Bullard mid-afternoon undermined the US dollar’s strength to some degree. Bullard continued his cautious streak, commenting that soft inflation warranted keeping rates on hold during the near-term.

Wise Money Market News

There is no UK data left for release today, leaving the pound to react to the results of the midnight data released by the British Retail Consortium (BRC).

The German trade and current account balances have just been published, so the EUR will likely spend the day reacting to those. Signs of a surplus in Germany often causes tension with other member states, who accuse the Eurozone’s powerhouse economy of hoarding its windfalls rather than investing them in ways that would boost exports in other currency bloc economies.

This could allow GBP/EUR to make gains.

There is no impactful US data on the calendar, so GBP/USD could rise as markets digest yesterday’s comments from Bullard and Kashkari.

Pound soft as consumer optimism slides

UK retail data yesterday gave the Pound a boost after suggesting consumer spending was weathering the storm of strong inflation and weak wage growth.

UK retail data yesterday gave the Pound a boost after suggesting consumer spending was weathering the storm of strong inflation and weak wage growth.

 

The pound was largely on strong form yesterday after the latest retail data from the Confederation of British Industry (CBI) suggested consumer spending continues to hold up well.

Retail sales grew at the fastest pace in three months during July, with increased demand for summer clothing and groceries helping boost the retail sales index from 12 to 22.

However, CBI Head of Economic Intelligence, Anna Leach warned that the underlying factors keeping growth strong were ‘shaky’.

GBP/EUR was able to post a solid rise after a stellar performance from the latest US economic data pushed USD sharply higher across the board.

A preliminary estimate for US durable goods orders growth during July clocked in at an impressive 6.5% – well above the 3.9% forecast.

The previous month’s decline was revised to just -0.1%, after having been originally reported as a -1.1% fall.

Then, the advance goods trade deficit was shown to have narrowed to -US$63.9 billion, against forecasts of a smaller improvement to -US$65.5 billion.

GBP/USD also slipped lower on the latest US dollar strength, although the pound was able to retain more of its strength in the face of the charging USD than most major currencies.

Policymakers sounded less confident on inflation, however, pushing down the odds that they will hike interest rates again this year.

Wise Money Market News

The only UK data on the calendar today has already been released; GfK consumer confidence figures were published at midnight.

GBP exchange rates are therefore likely to trend at the mercy of Eurozone and US developments, thanks to the key data scheduled for release.

German consumer price index figures for July will further add to the debate over Eurozone monetary policy.

Inflation is expected to hold steady on the month, which isn’t a terrible result, but is far from the concrete evidence of increasing price growth that markets and the European Central Bank (ECB) wants to see.

Shortly after that, US second-quarter GDP figures are released.

Expectations are for an acceleration in year-on-year expansion from 1.4% to 2.6% which, taken together with yesterday’s strong data, is likely to significantly lift the odds of an interest rate hike in December, even after the Fed’s recent caution on inflation.

Pound stabilises above post-election lows, political uncertainty reigns supreme

After falling in reaction to the outcome of Thursday’s general election, the pound is beginning the week in a more stable position.

After falling in reaction to the outcome of Thursday’s general election, the pound is beginning the week in a more stable position.

The GBP/USD exchange rate is also likely to stumble on Wednesday, with the Federal Reserve expected to increase interest rates at its latest policy gathering.

When PM Theresa May called for a snap election back in April her campaign hinged on the promise of maintaining strength and stability during the UK’s Brexit negotiations.

However, it’s fairly safe to say that her ability to deliver on that promise is now in question, with Thursday’s vote leaving the nation more mired in uncertainty than ever.

The Conservatives succeeded in losing their majority, a result which is unlikely to strengthen Theresa May’s hand in exit talks.

May has so far resisted calls for her resignation but the prospect of a minority government backed by the DUP is currently failing to excite much confidence in the government’s ability to secure a good deal for Britain.

While the pound has now stabilised following Friday’s sell off, it remains at multi-week and multi-month lows against the major currencies.

Wise Money markets ahead

With no potentially exciting economic reports on the calendar for today, the fallout from last week’s vote will remain the main driver of GBP exchange rate movement.

If the outcome of the election leads to the pursuit of a ‘soft Brexit’ (where the UK retains access to the single market) the pound could ultimately benefit.

However, if it appears that those members of the Conservative party pushing for a complete severing of the UK’s relationship with the EU are more likely to get their way now that May has lost her majority, the pound could be headed for new lows over the next few weeks.

In light of everything that has happened/is happening, tomorrow’s UK inflation stats may prove less influential than usual.

That being said, the pound could come under further pressure if the rate of inflation eases.

Although the odds of the Bank of England (BoE) reconsidering its current stance on interest rates are minimal (especially in the face of such political uncertainty) easing consumer price pressures would certainly add to the argument in favour of keeping borrowing costs lower for longer.

The GBP/USD exchange rate is also likely to stumble on Wednesday, with the Federal Reserve expected to increase interest rates at its latest policy gathering.

 

 

 

Pound reels as UK left with hung parliament

Is there further for the pound to fall?

Is there further for the pound to fall?

The UK took to the polls yesterday in GE2017 and it is fairly safe to say that Prime Minister Theresa May didn’t get the result she was hoping for.

The pound was left reeling as the votes were calculated and the Conservatives fell short of the 326 seats required for a majority.

The fallout from the election will be the driving force behind GBP exchange rate movement over the rest of the day.

The pound surged back in April when PM Theresa May called the snap election on the widely held belief that the Conservatives would storm their way to an increased majority.

Bets that a landslide victory would strengthen Theresa May’s hand in Brexit negotiations initially kept the pound elevated, but the currency started losing ground as a rocky campaign left her victory in doubt.

GBP exchange rates dropped 2% as last night’s exit polls pointed to a hung parliament, and this time the polls proved accurate.

While these movements are hardly as dramatic as seen following the EU referendum last year, there could be further shifts on the horizon.

With the Conservatives failing to secure the required majority, the UK’s political landscape looks murkier than ever.

If Theresa May listens to calls for her resignation the situation will be even more tenuous with only days left until Brexit negotiations are due to commence.

Wise Money markets ahead

The fallout from the election will be the driving force behind GBP exchange rate movement over the rest of the day, with any shocking announcements (like Theresa May’s resignation) having the potential to extend the pound’s losses.

However, a rapid turnaround in coalition talks and the quick establishment of a working government could help the pound recover.

Although the UK is set to publish industrial/manufacturing production, construction output, trade and growth figures, the data is unlikely to have an impact with eyes so firmly focused on the outcome of yesterday’s historic vote.

 

 

 

Election jitters continue to grip pound

Unsurprisingly, the pound had election poll results to contend with yesterday.

 

Unsurprisingly, the pound had election poll results to contend with yesterday.

The pound has once again become a politically-correlated currency, following developments in election polls over economic data.

As a result, sterling continued to trend around its multi-week lows yesterday against many of its peers.

While the currency markets are scared by the latest UK election surveys, they’re not necessarily convinced.

According to a poll by Survation, the Conservative Party were only one point ahead of the Labour Party, while YouGov’s seat-by-seat projections were now indicating the Tories could end up 22 seats short of a majority.

The polls are causing much confusion.

While Survation’s poll puts the candidates neck-and-neck, the results are weighted according to whether or not the voters themselves say they are likely to actually go to the ballots.

Other surveys, which weight their findings based upon average turnouts for the respondent’s age or social group, for example, find differently.

So, while the currency markets are scared by the latest UK election surveys, they’re not necessarily convinced.

GBP/EUR declined even though, from a broader point of view, the euro wasn’t doing particularly well itself.

Data from the Eurozone was mixed, with retail PMIs weakening for Germany, Italy and the Eurozone as a whole, but strengthening in France. The German construction PMI also rose, while the Sentix investor confidence index beat predictions for June and Eurozone retail sales volumes outpaced estimates at 2.5%.

Weakness in the pound was the only thing that allowed the US dollar to make any gains, pushing GBP/USD marginally lower. Big things are happening in the US as well as the UK, so the currency markets were holding their breath for Thursday’s developments.

Today is the calm before a triple-whammy storm on Thursday, which is likely to see the pound stagnating against most of the major currencies.

An approaching election might be dragging force on sterling, but with other high-profile global happenings on the calendar, GBP could be afforded something of a reprieve.

 

 

 

 

Little on European markets but potential big day for the GBPUSD pair

The key event of yesterday the June ECB meeting had little effect on wise money markets.

The key event of yesterday the June ECB meeting had little effect on wise money markets.

Mario Draghi continued to put emphasis on the ECB standing ready to input more Quantitative easing, if deemed necessary.

Markets had little reaction as this is considered old news at this stage and as a result, there was no major direct influence on the Euro. Most of yesterday was generally fairly quiet in terms of other Euro data, or rather lack of.

Looking at the main Euro pairs over the last 24 hours, they’ve been trading in tight ranges and only differ slightly from yesterday’s open.

This is relatively calming following the yoyo-like movements we’ve previously been seeing due to Brexit uncertainty and the changing sentiment polls.

It looks like EURUSD is on its way back down from its early May rally and most of the majors are looking a little worse off than a couple of weeks ago.

 

Wise Money awaiting US Non-Farm Payroll figures

 

Looking ahead at the dollar, today we have the US Non-Farm Payroll figures for May due for release at 13:30.

Following the Fed’s preconditions of a rate hike being dependent on a continuing improvement in the labour market, these figures are likely to be watched very closely.

If today’s figure is close to the forecast (164,000), it should strengthen expectation for a Fed rate hike through the coming summer months.

This could provide us with some upwards movement as we move into this weekend.

 

 

 

 

 

Pound rattled on new referendum poll

The pound dived sharply yesterday on the release of a new poll that showed a surprise lead for the leave camp.

 

The pound dived sharply yesterday on the release of a new poll that showed a surprise lead for the leave camp.

Over the last two weeks we have seen good momentum for the pound off the back of polls, suggesting the remain camp was pulling ahead.

However, it was almost inevitable that we would see a conflicting poll suggesting the opposite, and yesterday two Guardian/ICM polls showed a split of 52%-48% in favour of a Brexit.

The pound fell sharply against the USD and the euro on this news, and is continuing to struggle this morning. In the run up to polling day we are likely to see the pound pulled around significantly as conflicting polls and news drive price action.

Wise money news to come

Today the focus will continue to be on the Brexit momentum as we start the month of June.

In addition we have ISM manufacturing data from the US later today and sentiment is split on the momentum for manufacturing, and a weak number cannot be ruled out.
Elsewhere, we have substantial amounts of PMI data from the Euro area, France and Germany. The initial Euro area number came in slightly weaker, however Germany and France both showed good uplift.

The interest today will be in the periphery and the potential for the numbers here to be soft.