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Central Bank Comments Drive Pound and US Dollar

Pound News: Bank of England Caution and UK Prime Minister’s Warning Pressures GBP

Investors sold the Pound on Thursday, as Bank of England (BoE) Governor Mark Carney followed up on the bank’s concerning Wednesday forecasts with warnings that Britain was still not sufficiently prepared for Brexit.

On top of this, the Pound’s appeal weakened further following the latest comments from UK Prime Minister Theresa May in which she said that if Parliament blocked her Brexit deal, then the government would begin preparation for a no-deal Brexit.

Pound investors may react to this morning’s UK GfK consumer confidence data, but potential Brexit developments are much more likely to remain influential.

Euro News: Stronger Eurozone Data and Rival Weakness Boosts Shared Currency

Markets found the Euro more appealing yesterday, and thanks to some stronger-than-expected German unemployment data and Eurozone confidence results, the Euro was able to more easily capitalise on the US Dollar’s (USD) weakness.

As the Euro and US Dollar are negatively correlated, the Euro often strengthens during times of US Dollar weakness. Signs that monetary policy divergence between the US and Eurozone could stop deepening also boosted the Euro.

Some of this week’s most influential Eurozone ecostats will come in today, including Eurozone inflation projections for November, which could influence European Central Bank (ECB) interest rate hike bets – and the Euro – if they surprise investors.

US Dollar News: Fed Chairman’s Tone Perceived as Dovish

On Wednesday evening, Federal Reserve Chairman Jerome Powell surprised markets by rowing back on some of the hawkishness he had shown in October. Despite previously saying that US interest rates were still ‘far from’ neutral, he now says the rate is ‘just below’ neutral.

Powell also indicated that US interest rates were unlikely to go well above neutral but the bank would continue to closely watch US data. The news indicated that the US interest rate hike cycle was coming to an end, which has kept pressure on the US Dollar since.

The US Dollar is also under pressure on speculation that US-China trade tensions could lighten at an upcoming meeting between US President Donald Trump and China President Xi Jinping today. If they do, safe haven demand would soften and the US Dollar would weaken further.

Canadian Dollar News: CAD Holds Ground despite Oil Price Slump

Prices of oil continued to slide yesterday, with the price of crude oil falling below US$50 per barrel for the first time in over a year as market concerns about oversupply persisted.

The commodity rebounded slightly on Thursday afternoon, but the Canadian Dollar also benefitted from weakness in the US Dollar as Federal Reserve interest rate hike bets fell and risk-sentiment rose.

This week’s most anticipated Canadian ecostats, Q3 and September Gross Domestic Product (GDP) growth figures, will be published today. They are likely to influence Canadian Dollar movement, as are any potential developments in US-China trade.

 

Australian Dollar News: ‘Aussie’ Surges on Fed Dovishness and US-China Trade Hopes

The Australian Dollar has already seen strong performance for most of the week, amid speculation that the US and China could see a breakthrough in trade tensions during the upcoming G20 summit in Buenos Aires, which starts today.

Demand for the risk-correlated Australian Dollar strengthened further yesterday in reaction to comments from Federal Reserve Chairman Jerome Powell. His comments dampened Fed interest rate hike bets and made investors more eager to go after yield.

Australian Dollar investors are now anticipating developments in US-China trade matters, with the two leaders meeting expected to take place tonight.

 

Upcoming Data

Friday, 30th November

00:01    UK GfK Consumer Confidence

00:30    Australian Private Sector Credit

07:00    German Retail Sales

07:45    French Inflation Rate

10:00    Eurozone Inflation Rate

13:30    Canadian Growth Rate

14:45    US Chicago PMI

 

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

 

Joe Mayhew

Currency Trader

Jam@fcgworld.co.uk

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