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Soft Brexit Hopes Bolster Pound While Markets Reverse This Week’s Risk Rally

Pound News: Sterling Climbs on Amendment for Parliament’s Say on Brexit

On Tuesday night, Sterling investors were spooked by a parliamentary vote. The Pound briefly tumbled as MPs voted to hold the government in contempt of Parliament for refusing to publish Brexit legal advice.

However, the following vote saw Parliament vote for an amendment that would give it greater control over the Brexit process if Prime Minister Theresa May’s deal fails to pass next week. This bolstered hopes that Parliament would find a way to avoid a ‘no-deal’ Brexit and strengthened the Pound.

No notable UK data will be published today, but market reaction to UK politics as well as Brexit news will continue to drive Sterling.

Euro News: Eurozone Data Remains Unsupportive for Shared Currency

The Pound recovered most of its weekly losses against the Euro yesterday, as the Eurozone’s latest PMI results confirmed that the Eurozone economy was continuing to slow into Q4.

Hopes that the Eurozone’s economic growth could rebound slightly to around 0.4% in Q4 were doused, as Eurozone services and composite PMIs indicated that Q4 growth of 0.3% was more likely.

Eurozone data will remain in focus for Euro investors for the remainder of the week, with German factory orders from October, and November construction stats due to be published today.

US Dollar News: USD Supported by Returning Safe Haven Demand

At the beginning of the week, safe haven currencies like the US Dollar plunged as investors were optimistic about an announced US-China trade truce – but much of that optimism has already unravelled.

On Tuesday night, US President Donald Trump took aim at Chinese imports again, worsening market concerns that the tensions between the nations would not lighten significantly any time soon. Fresh trade jitters meant fresh demand for the safe haven US Dollar.

More notable US data will be published today, including trade balance stats from October and November’s non-manufacturing PMI from ISM – although tomorrow’s US Non-Farm Payroll report will be more influential.

Canadian Dollar News: Bank of Canada (BoC) Leaves Monetary Policy Frozen

As was widely expected, the Bank of Canada (BoC) opted to leave Canadian monetary policy frozen during its December policy decision yesterday. The bank opted to continue to observe the impact of its recent interest rate hikes and Canada’s cooling economy.

The BoC has hiked Canadian interest rates five times since summer 2017 and analysts predict another rate hike could be on the way in January. However, the Canadian Dollar weakened slightly as BoC concerns about weaker oil prices and US-China trade jitters weighed on optimism.

Canadian Dollar investors are likely to react to Canadian trade balance and Ivey PMI results today, but an upcoming speech from BoC Governor Stephen Poloz may also prove influential.

Australian Dollar News: Australian Growth Falls Well Short

The Pound to Australian Dollar surged on Wednesday, recovering its early-week losses and hitting its best levels since last week, as the Australian Dollar was sold due to numerous factors. On top of fading risk-sentiment amid fresh US-China trade jitters, new Australian data concerned investors.

Australia’s key Q3 Gross Domestic Product (GDP) results were published yesterday and came in well short of forecasts. The data indicated that Australia’s economy was performing less well than expected and this weighed on the ‘Aussie’ outlook.

Reaction to today’s Australian trade balance and retail sales stats, as well as any further US-China developments, could influence some late-week Australian Dollar movement.

 

Upcoming Data

 

Thursday, 6th December

00:30    Australian Trade Balance

00:30    Australian Retail Sales

07:00    German Factory Orders

08:30    German Construction PMI

13:30    Canadian Trade Balance

13:30    US Trade Balance

13:50    BoC Governor Poloz Speech

15:00    Canadian Ivey PMI

15:00    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 Worthington

Currency Trader

daw@fcgworld.co.uk

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