UK Industrial Orders Rebound Encourages Pound Demand

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  • Signs of RBA Optimism Fail to Shore up AUD Exchange Rates – Improved leading index could encourage Australian Dollar gains
  • Rebound in Industrial Orders Boosts Pound – Future of Brexit deal continues to hang over GBP outlook
  • Sharp Slump in Oil Prices Puts Canadian Dollar on Back Foot – Global supply concerns dampen investor sentiment
  • Euro Softens in Spite of German Producer Price Pressures – Markets still doubt prospect of ECB interest rate hike 

Balanced RBA Meeting Minutes Do Little for Australian Dollar

There was limited market reaction to the release of the Reserve Bank of Australia’s (RBA) November meeting minutes, which remained fairly balanced in nature. Although policymakers still expressed confidence in the growth and wage outlook the odds of any monetary tightening do not appear any higher. With market risk appetite still lacking and the latest weekly consumer confidence index easing this left the Australian Dollar with little in the way of support yesterday.

Even so, an improvement in October’s Westpac leading index could offer AUD exchange rates a boost this morning.

Stronger Industrial Orders Support Pound Sterling

The Pound continued to recover ground against many of the majors in the wake of an unexpectedly sharp rebound in the latest CBI industrial trends orders index. As the index surged from -6 to 10 this indicated that the UK manufacturing sector had recovered some of its lost momentum in November. With orders picking up, even in the face of persistent Brexit-based uncertainty, confidence in the outlook of the UK economy improved overnight.

However, as Theresa May still faces a struggle to get her proposed Brexit deal through Parliament the mood towards the Pound could easily sour again.

German Producer Price Index Fails to Shore up Euro

While the German producer price index accelerated on the year in October this failed to encourage any significant demand for the single currency. The monthly price index proved less positive in nature, with price growth easing from 0.5% to 0.3%. All in all, this highlighted the less sustained nature of inflationary pressure within the Eurozone, increasing the case for the European Central Bank (ECB) to remain on hold. Disagreement over the Italian budget continued to weigh on EUR exchange rates, meanwhile.

In the absence of any fresh Eurozone data today the Euro may struggle to find any particular cause for confidence.

Mixed Housing Data Encourages US Dollar Gains

October’s US housing starts and building permits figures offered encouragement to USD exchange rates last night, even though the construction sector continued to show signs of vulnerability. As housing starts returned to a positive state and building permits saw a smaller contraction than forecast the mood towards the US Dollar improved. The relative weakness of the Euro also offered a boost to USD exchange rates, with market risk aversion adding to the sense of bullishness. 

As forecasts point towards a sharp decline in October’s durable goods orders, though, the US Dollar could fall out of favour tonight.

Canadian Dollar Under Pressure as Oil Prices Slump

Oil prices plunged lower during Tuesday’s European session, driven by risk-off market trading and global oversupply concerns. With Iranian shipments of oil to South Korea and Japan set to resume in January global demand looks set to continue to outstrip supply. This left Brent crude down more than 4% on the day’s opening levels, trending in the region of US$64 per barrel. As a result, the Canadian Dollar remained under pressure.

A recovery in September’s wholesale trade sales figure may offer the Canadian Dollar a boost overnight, however.

Dairy Price Slump Bodes Ill For NZD Outlook

Even in the midst of wider market risk aversion the New Zealand Dollar was able to hold its ground against many of its rivals. However, the outlook of NZD exchange rates remains muted thanks to the disappointing nature of the Global Dairy Trade auction. As prices continued to slide, slumping -3.5% on the fortnight, this highlighted the continued vulnerability of the New Zealand economy.

Disappointing credit card spending figures could increase the pressure on NZD exchange rates this afternoon.

Data Released

November 21st  10:30    AUD    Westpac Leading Index (MoM) (OCT)    0.1%
November 21st 13:00    NZD    Credit Card Spending (YoY) (OCT)    
November 21st 22:30    GBP    Public Sector Net Borrowing (OCT)    5.6 billion
November 22nd 00:30    CAD    Wholesale Trade Sales (MoM) (SEP)    0.4%
November 22nd 00:30    USD    Durable Goods Orders (OCT)    -2.5%

Post by TorFX

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