Pound Slides as Support for Brexit Plan Remains Limited

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  • Australian Dollar Benefits from Stronger Consumer Confidence – US-China trade tensions limit risk appetite
  • Brexit Anxiety Drags Pound Sterling Lower – Support for Theresa May’s Brexit plan remains lacking
  • Euro Muted as Italian Government Stands by Budget – Weaker German consumer confidence may add to single currency weakness
  • Disappointing Trade Data Puts Limited Pressure on New Zealand Dollar – NZD exchange rates shrug off widened trade deficit

Solid Consumer Confidence Supports Australian Dollar

A modest improvement in the ANZ Roy Morgan weekly consumer confidence index offered some support to the Australian Dollar yesterday. Investors took encouragement from this latest uptick in domestic sentiment, even as the wider sense of market confidence weakened. Signs that the US-China trade relationship is continuing to sour helped to limit the strength of AUD exchange rates, meanwhile. With Trump threatening to impose fresh tariffs on Chinese imports the global economy looks set to come under further pressure.

Unless third quarter Australian construction work shows an increase on the quarter the mood towards the Australian Dollar could sour today.

US Criticism of Brexit Deal Weighs Heavily on Pound

As the Trump administration expressed doubts over the proposed Brexit plan this left the Pound on the back foot overnight. The US intervention put further pressure on Theresa May, who is still struggling to stir up significant support for the proposed deal. An unexpectedly strong CBI reported retail sales index failed to offer GBP exchange rates a boost, meanwhile. Although the headline index showed a strong improvement on the month in November the underlying details of the report were less encouraging in nature.

If November’s BRC shop price index fails to impress this could see the Pound extending its downtrend further.

Italian Budget Worries Limit Euro Appeal

Support for the single currency proved limited last night as markets continued to fret over the Italian government’s budget plans. With the government planning to stick to its budget deficit target, in spite of it clashing with EU budget rules, political tensions look set to hang over the Eurozone for some time to come. As November’s Italian business and consumer confidence indexes both saw a decline on the month, however, the country’s economic outlook remains questionable.

A decline in December’s German GfK consumer confidence index may give investors fresh incentive to sell out of the Euro tonight.

Safe-Haven Demand Shores up US Dollar

Although November’s US consumer confidence index showed a modest slowdown on the month this was not enough to drag the US Dollar down. USD exchange rates instead gained ground in response to the latest deterioration in relations between the US and China. With the Trump administration threatening to impose further tariffs on Chinese imports market risk appetite declined, benefitting the safe-haven US Dollar. While rising prices are showing signs of discouraging US consumers this failed to prevent USD exchange rates gaining ground.

Tonight’s third quarter gross domestic product data could provoke some volatility for the US Dollar if growth shows any signs of easing.

Canadian Dollar Benefits as Oil Prices Stage Recovery

After their sharp decline oil prices were able to recover ground yesterday, with Brent crude breaking back above the US$60 per barrel mark. Markets still expect to see an OPEC-led production cut in the near future, limiting the downside potential of the oil market. Even so, with US output looking set to pick up further in the coming months oil prices remain vulnerable to fresh weakness. In the absence of any wider sense of market risk appetite the Canadian Dollar was left on the back foot.

As long as oil prices recover further ground today, though, this may help CAD exchange rates pick up once again.

New Zealand Dollar Shrugs Off Weak Trade Data

While October’s raft of New Zealand trade data proved generally discouraging this failed to prevent NZD exchange rates pushing higher yesterday. Even though the trade deficit did not narrow as far as forecast investors were not discouraged. The New Zealand Dollar instead benefitted from the relative weakness of its antipodean cousin, capitalising on the softened Australian Dollar and making gains against many of the majors.

However, the release of the Reserve Bank of New Zealand’s (RBNZ) latest financial stability report could provoke some volatility for NZD exchange rates this morning.

Data Released

November 28th 07:00 NZD Reserve Bank of New Zealand Financial Stability Report 
November 28th 11:01 GBP BRC Shop Price Index (YoY) (NOV) 
November 28th 11:30 AUD Construction Work Done (3Q) 1.0%
November 28th 23:00 EUR German GfK Consumer Confidence (DEC) 10.5
November 29th 00:30 USD Gross Domestic Product Annualised (QoQ) (3Q) 3.5%

Post by TorFX

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