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Euro Fails to Capitalise on Falling Eurozone Unemployment Rate

Pound News: Markets Unimpressed by May’s Cabinet Reshuffle

Markets remained unimpressed with the results of Theresa May’s highly anticipated cabinet reshuffle, leaving Pound (GBP) exchange rates on a weaker footing.

The lack of change, and reports that some ministers refused to move as the Prime Minister wanted, added to investor doubts over Theresa May’s political strength and ability to control her cabinet.

However, the release of the latest UK trade and production data could offer the Pound a rallying point today, providing the economy shows signs of strengthening.

 

Euro News: Falling Eurozone Unemployment Failed to Boost EUR Rates

In another positive development, the Eurozone unemployment rate was confirmed to have fallen to a near-nine-year low of 8.7% in November.

This failed to encourage any particular resurgence for the Euro (EUR), however, as markets continued to discount the likelihood of the European Central Bank (ECB) returning to a hawkish bias in the near future.

With no fresh data set for release today the Pound to Euro (GBP/EUR) exchange rate could see some solid gains, with support for the single currency set to remain muted.

 

US Dollar News: USD Exchange Rates Shrug Off Weaker Business Optimism

The more optimistic nature of recent comments from some Federal Reserve policymakers kept the Pound to US Dollar (GBP/USD) exchange rate under pressure on Tuesday.

While the latest NFIB small business optimism index and JOLTS job openings data disappointed this was not enough to dent the bullish mood of investors, allowing the US Dollar to recover further ground.

Even so, if this afternoon’s US import and export price index figures point towards easing inflationary pressure then the appeal of the US Dollar could deteriorate sharply.

 

Canadian Dollar News: Housing Starts Highlight Softening Canadian Market

Although December’s Canadian housing starts figure bettered forecast this still demonstrated a sharp slowdown on the month, to the detriment of the Canadian Dollar (CAD).

Demand for the Canadian Dollar remained limited thanks to an increased sense of market risk aversion, even after Brent crude edged above US$68 per barrel to touch its highest level since May 2015.

If US crude inventories show a drawdown on the week this could encourage further gains for the oil market, creating support for the commodity-correlated CAD.

 

Australian Dollar News: Surge in Building Approvals Not Enough for AUD Rally

Even though Australian building approvals surged 11.7% on the month in November this failed to particularly boost Australian Dollar (AUD) exchange rates.

Confidence in the health of the wider Australian economy remains decidedly limited at this stage, with a stronger US Dollar and bets of a faster pace of monetary tightening from the Fed weighing on the outlook.

With tonight’s retail sales data expected to show little change on the month the Pound Australian Dollar (GBP/AUD) exchange rate could find further support.

 

New Zealand Dollar News: Price Correction Drives NZD Higher

While general risk sentiment diminished the New Zealand Dollar (NZD) continued to benefit from a price correction in the wake of its bearish run into the New Year.

Although investors remain somewhat sceptical over the domestic outlook, given the uncertainty that still surrounds the centre-left government and the future of the Reserve Bank of New Zealand (RBNZ), this kept NZD exchange rates on an uptrend.

Nevertheless, the New Zealand Dollar remains vulnerable to downside pressure in the absence of supportive domestic data.

 

Upcoming Data

Wednesday, 10 January 2018

09:30     UK Industrial Production

09:30     UK Visible Trade Balance

13:00     UK NIESR Gross Domestic Product Estimate

13:30     Canadian Building Permits

13:30     US Import and Export Price Indexes

 

David Bayliss

Currency Dealer

01442 892 067

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