Currency Review: GBP, AUD, EUR, USD, CAD, CNY Exchange Rates11 December 2017 by FC Exchange
Is Brexit unravelling once again? Currency experts FC Exchange take a look at what could impact the currency market this week amid Brexit and central bank meetings.
GBP – Brexit deal shows sign of unravelling – sterling cautious
– Positivity surrounding Brexit negotiations started sterling off on the front foot last week, rising to a six-month high in trade-weighted index terms.
– As the week opened, the pound to euro (GBP/EUR) exchange rate rose to a one-month high as Theresa May and Michel Barnier said talks were moving in the right direction.
– Sterling rallied on Friday after Brexit negotiations made a breakthrough following overnight talks and allowing thoughts to move on to trade. GBP/USD broke through the 1.35 key technical level as a result.
– The NIESR UK gross domestic product estimate printed at 0.5% in November, against the 0.4% forecast.
The pound has started the week in a tight range against other currencies as the Brexit deal made at the close of last week shows signs of unravelling. Brexit Secretary David Davis has been sending mixed messages along with other politicians after hasty four-way talks last week, leading some to believe that Britain isn’t prepared to agree to what it signed up for. David stated that the agreement ‘was more a statement of intent that it was a legally enforceable thing.’ Ireland has struck back to say that the deal is legally binding. Monday will begin the week with a meeting in Brussels with EU representatives. Theresa May will also hold a Cabinet meeting following a weekend of reports that her inner circle is fractured once again. One of the most influential events for sterling this week is likely to be the European Council meeting spanning across the 14th and 15th December.
Tuesday could also be a big day for the pound when the UK inflation figure is printed. It’s currently forecast to come in at 3.0%, but any movement above or below could create sterling volatility. The Bank of England’s (BoE) interest rate decision will be the talk of the market on Thursday, with forecasts expecting the level to hold at 0.50%.
EUR – ECB’s Draghi speech, Eurozone economic sentiment, and employment data ahead
– Germany’s factory orders slipped in October on the year, coming in at 6.9% rather than the 7.0% predicted after September’s 9.7%.
– Towards the end of last week, the euro fell against the US dollar (EUR/USD) as Germany’s trade surplus narrowed.
– Eurozone retail sales came in at 0.4% in October on the year following September’s stronger 4.0%. Economists had thought the number would reside in the region of 1.6%. On a monthly basis, October showed a -1.1% decline.
In the week ahead, the euro might feel the impact of the ZEW Eurozone economic sentiment survey released on Tuesday. Wednesday might also be a day for market movement with the release of Eurozone industrial production and employment figures. Manufacturing and services stats will follow on Thursday. Additionally, on Thursday, the European Central Bank (ECB) will announce its own interest rate decision with central bank President Mario Draghi holding a follow-up press conference in Frankfurt.
USD – Trump to make closing tax reform argument this week
– The highly influential non-farm payrolls number was published at 228K in November against the forecast 195K. Headline unemployment held steady at 4.1%.
– The University of Michigan sentiment index fell from 98.5 in November to 96.8 in December; economists had predicted a rise to 99.0.
– US factory orders came in at -0.1% in October rather than the -0.4% contraction markets were expecting.
– The USD gained some support last week following President Donald Trump’s success regarding his tax reform bill. By mid-week, the US dollar found support as investors hoped to see the tax legislation pass before year-end.
This week it’s reported that Trump will prepare his closing tax reform argument ready to deliver on Wednesday. Trump tweeted: ‘Getting closer and closer on the Tax Cut Bill. Shaping up even better than projected. House and Senate working very hard and smart. End result will be not only important, but SPECIAL!’
Additionally, Wednesday will see the release of the US inflation figures which are forecast to rise from 2.0% to 2.2% on the year in November. The Federal Open Market Committee (FOMC) will also make its interest rate decision later in the Wednesday session. The US advance retail sales reading will be out in Thursday’s session.
AUD – Australian employment data ahead
– Last week the Australian gross domestic product (GDP) number came in at 2.8% in quarter three on the year, following forecasts for 3.0% growth. The previous reading was revised to 1.9%.
– This week, Reserve Bank of Australia (RBA) Governor Philip Lowe will give a speech in Sydney on Tuesday which may impact the Aussie.
– Thursday could be another big day for the Australian dollar when the Australian labour market statistics hit the market.
CAD – BoC’s Poloz speech in focus
– Last week the Bank of Canada (BoC) held interest rates steady at 1.0% as forecast.
– Canadian housing starts data beat the 213K forecast to increase to 252.2K in November.
– BoC Chief Stephen Poloz is scheduled to make a speech on Thursday this week, his words might create some market movement.
– Canadian existing home sales numbers will be out on Friday.
CNY – Markets await Chinese retail sales and industrial production figures
– The Chinese consumer price index showed a decline last week, coming in at 1.7% in November on the year, after October’s 1.9% reading. Economists had expected a smaller fall to 1.8%.
– China’s trade surplus with the US grew to $27.82 billion in November, up from October’s $26.62 billion. September’s $28.08 billion was the highest reading on record.
– This week, Chinese retail sales and industrial production numbers will be out on Thursday which may have a moderate impact on the yuan.
Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.
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