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Risk Aversion Rules as Stocks Tumble and Global Growth Concerns Persist

Pound News: Brexit Fears and UK Retail Weakness Continues to Leave Sterling Limp

Markets continuing to wait for major developments in the Brexit process had little reason to move on Sterling yesterday, and the British currency was instead more inspired by movements in rival currencies.

Investors were even more hesitant to buy Sterling due to signs that UK retailers may have had a much weaker-than-expected holiday season. Data showed that sales on the day after Christmas were down for the third consecutive year.

UK finance mortgage approvals data will be published today, but Pound investors are more likely to await major Brexit developments anticipated in the New Year than make any big moves on the currency any time soon.

Euro News: Euro Benefits from US Dollar Weakness

Despite the European Central Bank’s (ECB) latest economic bulletin remaining cautious, the Euro strengthened against the Pound on Thursday, with the ECB remaining concerned about slowing global growth.

The primary reason for the Euro’s Thursday strength was weakness in its biggest rival, the US Dollar. The Euro and US Dollar have a negative correlation.

Demand for the Euro could be influenced by Germany’s December inflation projections today. If the stats beat forecasts they could boost European Central Bank (ECB) interest rate hike speculation and make the Euro more appealing.

US Dollar News: US Dollar Losing its Appeal as Market’s Favourite Safe Haven Currency

The US Dollar has been weak for most of the week so far, as the US government partial shutdown persists and markets become more concerned that global growth could slow notably next year.

Market anxiety about global growth and US-China trade jitters would typically have benefitted the safe haven US Dollar. However, analysts speculate that the Japanese Yen (JPY) is becoming the market’s safe haven currency of choice amid concerns about the slowing US economy and Federal Reserve monetary policy outlook.

Some notable US data due for publication today includes US Chicago PMI and pending home sales. Any signs that the US government shutdown could end soon would also support the US Dollar.

Canadian Dollar News: Oil Price Fluctuations Drive CAD

A lack of notable Canadian data this week is leaving the relatively risky trade-correlated Canadian Dollar more sensitive to movements in global markets and commodity prices.

As prices of oil plummeted earlier in the week before a record-breaking 8% rally on Wednesday, the Canadian Dollar has seen wide fluctuations. Oil prices weakened again yesterday making it easier for GBP/CAD to rise.

No notable Canadian data will be published today. As a result, the Canadian Dollar will remain sensitive to movements in oil prices and global risk-sentiment.

Australian Dollar News: Market Risk Aversion Leaves ‘Aussie’ Weakened

The Australian Dollar briefly surged in reaction to Wednesday night’s US stock market rally, but towards the end of Thursday’s session the Pound to Australian Dollar exchange rate was climbing again.

Investors sold the Australian Dollar as lingering concerns about global growth and US-China trade tensions, as well as weaker Chinese data, left investors hesitant to buy the relatively risky Australian Dollar.

Australian private sector data from November will be published today but is unlikely to be highly influential. Instead, the Australian Dollar is most likely to be influenced by shifts in market risk-sentiment.

 

Upcoming Data 

Friday, 28th December

00:30    Australian Private Sector Credit

09:30    UK Finance Mortgage Approvals

13:00    German Inflation Rate

13:30    US Wholesale Inventories

14:45    US Chicago PMI

15:00    US Pending Home Sales

 

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

 

Thomas Taylor

Currency Trader

tnt@fcgworld.co.uk

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