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Federal Reserve Dovishness Drives Risk-Sentiment, Election Speculation Knocks Pound

Pound News: General Election Concerns Knock Sterling

The uncertainties for the UK economic outlook and the Pound just piled up this week. After Parliament voted to pressure the government to present a ‘Plan B’ within days if next week’s Brexit vote fails, the opposition Labour Party indicated it would pressure the government to spark a general election.

Labour Party leader Jeremy Corbyn said that a national election must be prioritised if Parliament rejects the government’s Brexit deal. This additional political uncertainty left the Pound unappealing.

Notable UK ecostats, including growth and production results, will be published today. However, they are unlikely to be particularly influential as investors anticipate next week’s Brexit vote.

 

Euro News: Euro Slips Back from Weekly Best as ECB Minutes Mention Downside Risks

Demand for the Euro has been fairly strong for most of the week, as poor performance in rivals like the Pound and especially the US Dollar (USD) have left the shared currency more appealing in comparison.

However, the Euro’s strength faded slightly on Thursday as the European Central Bank’s (ECB) latest meeting minutes saw the bank expressing concerns about the downside risks to the Eurozone economy.

The Euro is likely to remain volatile to the strength of the Pound and US Dollar today amid a lack of notable Eurozone data due for publication. GBP/EUR is on track to end the week lower.

 

US Dollar News: GBP/USD Struggles to Gain amid Lingering Safe Haven Demand

For much of the week, the US Dollar has been unappealing as US-China trade developments and dovish Federal Reserve interest rate hike bets left safe haven currencies like the US Dollar less appealing.

However, some factors are causing lingering demand for safe havens. Weaker prices of commodities like oil, as well as a lack of any real resolutions from US-China trade talks, kept investors from selling the US Dollar too much, and this prevented GBP/USD from rising.

Key US inflation data from December will be published today. If it is higher than expected it could bolster Federal Reserve interest rate hike bets and push GBP/USD lower.

 

Canadian Dollar News: Weaker Oil Prices Help GBP/CAD to Recover

After spending most of the week so far tumbling, the Pound to Canadian Dollar exchange rate rebounded slightly yesterday. Investors were hesitant to keep buying the risky trade-correlated Canadian Dollar as oil prices weakened.

News that oil prices tumbled in reaction to a lack of resolution in US-China trade talks, as well as surging US oil supplies, left the Canadian Dollar weaker.

No notable Canadian data will be published today, but the Pound is unlikely to recover much further against the Canadian Dollar before the end of the week unless market risk-sentiment worsens.

Australian Dollar News: Underwhelming Chinese Data Keeps ‘Aussie’ off Best Levels

The Australian Dollar has been one of this week’s best performing major currencies, but the Pound to Australian Dollar exchange rate rebounded slightly from its weekly lows yesterday despite generally high market demand for riskier trade-correlated currencies like the ‘Aussie’.

Investors found the Australian Dollar a little less appealing following the day’s disappointing Chinese data, with China being Australia’s biggest trade partner. A lack of solid resolution in US-China trade negotiations also weighed on the ‘Aussie’.

Australian Dollar investors will spend much of today’s session reacting to the latest Australian construction, business confidence and retail sales results. Shifts in global risk-sentiment will also prove influential.

 

Upcoming Data

Friday, 11th January

12:30    Australian Retail Sales

09:30    UK Growth Rate

09:30    UK Manufacturing and Industrial Production

09:30    UK Trade Balance

13:30    US Inflation Rate

 

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

 

David Worthington

ssociate Director

daw@fcgworld.co.uk

 

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