Pound Picks Up Despite Continued UK Political Volatility

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Headlines

  • Trade Hopes Encourage Australian Dollar – AUD exchange rates vulnerable ahead of RBA meeting minutes
  • GBP Exchange Rates Recover Ground as Politics Continue to Dominate Outlook – Threat of no confidence vote against Theresa May to keep Pound under pressure
  • New Zealand Dollar Fails to Capitalise on Stronger Manufacturing PMI – Solid service sector growth may encourage gains
  • US Dollar Dips as Production Data Disappoints – Signs point towards increasing impact from trade tensions


Australian Dollar Pushes Higher on Hopes of US-China Trade Progress

An improved sense of market risk appetite helped to shore up the Australian Dollar ahead of the weekend. Investors were encouraged by the disappointing nature of the latest US production data, which suggested that the world’s largest economy is feeling the pressure from global trade tensions. As markets continue to hope for a de-escalation in the trade spat between the US and China this gave AUD exchange rates a modest boost.

Ahead of tomorrow’s Reserve Bank of Australia (RBA) meeting minutes the mood towards the Australian Dollar is likely to dim.

Pound Recovers Ground as Political Jitters Ease

Demand for the Pound picked up during Friday’s European session, even though markets continued to bet on the prospect of Theresa May facing a vote of no confidence. After Thursday’s sharp decline GBP exchange rates found some support as Brexit anxieties temporarily eased. As Environment secretary Michael Gove opted not to resign in protest against May’s plan this gave the Pound some additional support, alleviating some of the pressure on the prime minister.

Even so, political developments may continue to drive GBP exchange rate volatility over the course of the day.

Hopes of Higher Eurozone Inflation Shore up Euro

While European Central Bank (ECB) President Mario Draghi failed to adopt a particularly optimistic tone in comments on Friday this was not enough to drive down the Euro. Although Draghi acknowledged the prospect of the ECB altering its projected interest rate path in the event of weaker inflation EUR exchange rates still recovered ground. As the German wholesale price index strengthened on the year this encouraged bets that inflation could continue to push higher.

An uptick in Eurozone construction output could give investors additional incentive to favour the single currency tonight.

US Dollar Falters After Disappointing Industrial Production

October’s US industrial production data weighed heavily on USD exchange rates, with growth slowing from 0.3% to just 0.1% on the month. This decline highlighted the vulnerability of the US economy to continued trade tensions, diminishing the appeal of the US Dollar. As Atlanta Fed President Raphael Bostic called for greater caution in raising interest rates this put an additional dampener on USD exchange rates, raising the odds of the central bank taking a slower pace of monetary tightening in 2019.

A steady NAHB housing market index is likely to have a limited impact on the US Dollar overnight.

Canadian Dollar Remains Under Pressure Despite Improved Manufacturing Sales

Even though September’s manufacturing sales saw a stronger rebound than forecast on the month this failed to shore up CAD exchange rates. While market risk appetite picked up the mood towards the Canadian Dollar remained less positive in nature. As oil prices continued to recover this had limited impact on the commodity-correlated currency, with Brent crude still trending below US$69 per barrel.

The Canadian Dollar may struggle to find any positive momentum today in the absence of any new domestic data.

Stronger Manufacturing PMI Fails to Boost New Zealand Dollar

In spite of a solid improvement in the latest New Zealand manufacturing PMI NZD exchange rates came under pressure on Friday. Although the domestic economy showed signs of resilience as the manufacturing sector expanded the upside potential of the New Zealand Dollar proved limited. After making strong gains in the wake of other recent data investors failed to see enough incentive to push the ‘Kiwi’ higher still.

If October’s services PMI also shows an improvement, though, this should limit any New Zealand Dollar bearishness in the near term.


Data Released

November 19th 08:30 NZD Services PMI (OCT) 53.8
November 19th 21:00 EUR Eurozone Construction Output (YoY) (SEP) 3.6%
November 20th 02:00 USD NAHB Housing Market Index (NOV) 68

Post by TorFX

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