Pound Exchange Rates Plunge as Parliamentary Vote on Brexit Postponed

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  • Australian Dollar Benefits as Home Loans Pick Up – Solid NAB business confidence index could offer additional support
  • Pound Crumbles After May Postpones Parliamentary Vote on Brexit – UK political jitters surge as uncertainty returns
  • Steady German Trade Data Supports Euro Demand – Fresh slump in German economic confidence may dent EUR exchange rates
  • New Zealand Dollar Strengthens as Manufacturing Activity Increases – Confidence in domestic outlook improves in spite of risk aversion

Increased Lending Boosts Australian Dollar

An unexpectedly sharp rebound in Australian home loans in October encouraged greater confidence in the Australian Dollar yesterday. As investment lending also saw growth on the month this helped to bolster AUD exchange rates, even in the face of persistent market risk aversion. However, as Chinese inflation data showed signs of easing the risk-sensitive Australian Dollar struggled to find significant headway against its rivals.

Even so, an uptick in November’s NAB business confidence index could give AUD exchange rates a stronger leg up this morning.

Pound Collapses Amid Brexit Uncertainty

In another blow to the Pound, October’s UK gross domestic product showed a minimal improvement on the month. After two solid months of contraction the economy only mustered growth of 0.1%, highlighting its continued weakness in the face of Brexit-based uncertainty. GBP exchange rates dramatically extended their slump overnight after Theresa May announced the postponement of Parliament’s vote on her Brexit deal. This latest bout of political volatility weighed heavily on the Pound.

Unless UK average weekly earnings data surprises significantly to the upside today the mood towards the Pound is unlikely to materially improve.

Euro Benefits from Resilient German Trade Data

EUR exchange rates found support as the German trade balance held steady in October, averting forecasts of the surplus narrowing once again. As export volumes saw a solid rebound on the month this encouraged greater confidence in the outlook of the Eurozone’s powerhouse economy. Even so, the Euro struggled to hold onto its gains after December’s Eurozone Sentix investor confidence index plunged from 8.3 to -0.3.

A similarly weak showing from the German ZEW economic sentiment index could weigh heavily on the single currency this evening.

US Dollar Recovers Ground as Market Sentiment Sours

In the wake of last week’s disappointing jobs data the US Dollar struggled to find much support against its rivals at the start of the week. However, as market confidence deteriorated dramatically overnight this helped to boost USD exchange rates. With safe-haven demand on the rise in the face of Brexit anxieties and global trade tensions the US Dollar was able to return to a stronger footing.

If November’s NFBI small business optimism index shows a fresh decline in sentiment, however, this may dent the appeal of the US Dollar.

Canadian Dollar Weakens as Housing Starts Contract

Although October’s Canadian housing starts figure showed a smaller contraction than forecast this was not enough to boost the Canadian Dollar. After ending last week on a stronger footing CAD exchange rates came under renewed pressure as the general sense of market risk appetite turned. With oil prices on a renewed downtrend there was little to stop the Canadian Dollar losing ground against its rivals once again.

Unless investor sentiment improves CAD exchange rates look set to shed further ground over the course of the day.

Solid Manufacturing Activity Shores up New Zealand Dollar

The third quarter manufacturing activity index painted a more encouraging picture of the economic outlook, shoring up the New Zealand Dollar yesterday. As activity continued to expand strongly on the quarter this boosted confidence in the economic outlook, in spite of global growth worries. This encouraged NZD exchange rates to push higher even as market risk appetite generally deteriorated.

A positive showing from the latest ANZ truckometer, pointing towards stronger economic growth, would give investors further incentive to favour the New Zealand Dollar today.

Data Released

December 11th 08:00 NZD ANZ Truckometer (MoM) (NOV) 
December 11th 11:30 AUD NAB Business Confidence Index (NOV) 
December 11th 20:30 GBP Average Weekly Earnings (3M/YoY) (OCT) 3.0%
December 11th 21:00 EUR German ZEW Economic Sentiment Survey (DEC) -25
December 11th 22:00 USD NFIB Small Business Optimism (NOV) 107

Post by TorFX

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