AUD GBP Tumbles as UK and EU Close in on Divorce Settlement

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Headlines

  • ‘Aussie’ Slumps on US Data – Strong US figures weaken demand for risky AUD
  • AUD GBP Tumbles on Signs of Brexit Progress – UK and EU near agreement for £50 billion divorce bill
  • AUD EUR Drops on German Inflation Data – Above-forecast price growth boosts Euro
  • US Dollar Higher on GDP Figures – Third-quarter growth beats forecasts

Australian Dollar

The Australian Dollar slumped versus its major peers yesterday after the release of strong US data. This, combined with a recent forecast from Goldman Sachs that iron ore prices could sink to US$50 per tonne, kept markets away from the risky ‘Aussie’.

Although Australian private sector credit and private capital expenditure data is set for release shortly, AUD is more likely to be moved by today’s Chinese manufacturing PMI and tonight’s US personal consumption figures.

Sterling

AUD/GBP tumbled one percent yesterday after it emerged that the EU may be close to agreeing the terms of the UK’s divorce bill. The UK’s financial liabilities for the exit have been hotly debated, with failure to make progress on the issue delaying talks by several months. Markets, hopeful that this progress would allow talks on trade to begin next month, rushed to buy the Pound.

With the outlook for the UK economy still uncertain, the predicted decline in today’s GfK consumer confidence survey is unlikely to boost appetite for the Pound.

Euro

Above-forecast German consumer price growth data boosted the Euro yesterday, even though the latest business confidence readings disappointed forecasts. Preliminary price growth figures showed that, after October’s stagnation, prices picked up 0.3% this month, while year-on-year growth rose from 1.6% to 1.8%. Economists had pencilled in a rise of 1.7%.

If today’s Eurozone inflation figures also prove better-than-expected, the Euro could see further strong gains as the odds of the European Central Bank (ECB) tightening monetary policy would increase.

US Dollar

Third-quarter US GDP figures gave the US Dollar a boost yesterday. Growth rose from 3% to 3.3% on the year, beating predictions by economists polled by Reuters for expansion of 3.2%. This marks the first time since 2014 that the US economy has expanded at a rate above 3% for two quarters in a row. The data has firmed the already sky-high odds of an interest rate hike from the Federal Reserve in December.

Personal consumption expenditure figures today could further boost rate hike odds – the data is the Fed’s favourite way of measuring inflation.

Canadian Dollar

Although the Canadian Dollar was tumbling elsewhere, it managed to make small gains versus the weaker Australian Dollar. This was despite the positive findings from the recent Financial System Review and press conference from Bank of Canada (BOC) Governor Stephen Poloz. Although the BOC warned about the nation’s overheating housing market and high levels of household indebtedness, overall the outlook for the Canadian economy is positive.

The third-quarter current account balance is the only Canadian data set for release today.

New Zealand Dollar

Although the New Zealand Dollar recorded small losses versus its safer peers, the ‘Kiwi’ was able to rise versus its commodity brethren as they weakened on the back of US data. An appearance before the Parliament Select Committee from Reserve Bank of New Zealand (RBNZ) Governor Grant Spencer yielded little of interest from a monetary policy perspective.

The ANZ activity outlook for November is likely to be overshadowed, like Australian data, by the headline Chinese and US reports on the calendar.

Data Released

30th November 10.00 NZD ANZ Activity Outlook (NOV)
30th November 10.01 GBP GfK Consumer Confidence (NOV) -11
30th November 11.00 CNY Manufacturing PMI (NOV) 51.5
30th November 20.00 EUR Eurozone Consumer Price Index Core (YoY) (NOV A) 1.0%
30th November 23.30 CAD Current Account Balance (3Q) -C$20.30b
30th November 23.30 USD PCE Core (YoY) (OCT) 1.3%

Post by TorFX

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