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Brexit Financial Services Hope Boosts Sterling, US Dollar Plunges as Safe Haven Demand Fades

Pound News: Sterling Surges on Brexit Speculation despite Weaker UK Manufacturing

Thursday was a busy day for the Pound, as a report indicating that the UK and EU had almost agreed to a sweeping deal on financial services post-Brexit led to a surge in demand for the British currency. The deal would reportedly be finalised in around three weeks.

Sterling’s strength was limited slightly by the UK October manufacturing PMI, which came in well short of forecasts. The PMI printed at its worst level in 27 months, indicating that Brexit and trade fears were hitting UK economic activity.

Britain’s construction PMI will be published today, but investors are more likely to await the services PMI on Monday or wait for further potential Brexit developments.

Euro News: Shared Currency Rebounds from Lows Following Previous Slump

The Euro has been sold off for most of the week so far in reaction to Italian budget concerns, as well as the news of slowing Eurozone economic growth. Higher market demand for safe haven currencies due to a global stock market selloff have also weighed on the shared currency.

However, the Euro rebounded on Thursday and has limited its losses against a stronger Pound, as well as recovering against the US Dollar. The Euro’s recovery was supported by this week’s stronger German and Eurozone Consumer Price Index (CPI) inflation results.

Euro investors will be focused on Markit’s final October manufacturing PMIs today. As the manufacturing projections in late-October were disappointing, any stronger-than-expected final results could offer the Euro some support.

US Dollar News: US Dollar sold off from Highs as Risk-Sentiment Returns

As October drew to an end, so did the stock market’s broad selloff. With markets seeing a solid recovery in November so far, investors are less eager to hold on to safe haven assets like the US Dollar. This was one factor causing the US currency to fall yesterday.

The latest US data didn’t help the US Dollar to hold its ground either. ISM’s key October manufacturing PMI was forecast to slip from 59.8 to 59, but instead the figure slowed to 57.7. While still a strong figure, the data did little for US Dollar investors.

Investors may be more eager to await today’s key US data regardless. The anticipated US Non-Farm Payrolls report will be published this afternoon and could influence Federal Reserve interest rate hike bets if it surprises.

Canadian Dollar News: CAD Investors Anticipate Friday’s Canadian Job Stats

Investors were hesitant to move too much on the Canadian Dollar yesterday, despite rising market demand for riskier commodity-correlated currencies.

Canada’s October manufacturing PMI from RBC, published yesterday, showed manufacturing slowing slightly from 54.8 to 53.9. This further limited market demand for the Canadian Dollar.

Investors may be more eager to move on the Canadian Dollar following the publication of today’s job market report from October. Canada’s September trade balance data may also prove influential.

 

Australian Dollar News: ‘Aussie’ Surges as Investors Buy Riskier Assets

Compared to the Canadian Dollar, the Australian Dollar benefitted considerably from the market’s higher demand for riskier assets. In fact the Australian Dollar was one of the few major currencies the Pound fell against yesterday.

Investors were even more eager to buy the Australian Dollar as Australia’s latest trade data came in well above expectations. The trade surplus rose rather than falling, with exports and export prices both rising. This left investors hopeful that Australia was weathering the worst of US-China trade jitters.

Australian Dollar investors will spend today reacting to Australia’s September retail sales results. If risk-sentiment rises further, the Australian Dollar could push even higher.

Upcoming Data

Friday, 2nd November

00:30    Australian Retail Sales

08:50    French Manufacturing PMI

08:55    German Manufacturing PMI

09:00    Eurozone Manufacturing PMI

09:30    UK Construction PMI

12:30    Canadian Trade Balance

12:30    Canadian Job Market Report

12:30    US Trade Balance

12:30    US Non-Farm Payrolls

14:00    US Factory Orders

 

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To keep up to date with the Euro, visit the Euro Blog in our Currency News section.

 

David Bayliss

Currency Trader

dbb@fcgworld.co.uk

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