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Stocks Plummet and Risky Currencies Sold as US-China Trade Tensions Deepen

Pound News: Brexit Uncertainty Leaves Sterling Volatile

The Pound remained under pressure yesterday amid this week’s broad Brexit uncertainties, but the day’s lack of noteworthy Brexit developments meant that the British currency remained rudderless, fluctuating and reacting to movement in rivals.

Sterling is being kept above its worst levels by speculation that the chances of a second EU referendum are rising, but warnings from officials that this is unlikely or that a ‘no-deal’ Brexit could still happen are ultimately keeping the Pound close to its worst levels.

Today’s UK consumer inflation expectations data is not expected to influence Sterling much. Brexit developments will remain the core focus, particularly with Parliament’s 11 December Brexit deal vote now mere days away.

Euro News: German Factory Data and Weakness in Rivals Help Euro to Hold Ground

The Pound to Euro exchange rate was limp on Thursday as weakness in major Euro rivals and riskier currencies left the shared currency looking more appealing. Demand for the Euro was supported by fresh weakness in the US Dollar (USD), due to the negative correlation between the currencies.

On top of this, the Euro was able to hold its ground thanks to Germany’s latest data. German factory orders beat expectations in October, rising for the third consecutive month, while construction improved slightly in November.

The Euro is more likely to be driven by Eurozone data today, as the bloc’s latest Q3 Gross Domestic Product (GDP) growth projections and Q3 employment change stats will be published.

US Dollar News: USD Fails to Benefit from Market Safe Haven Demand

Demand for safe haven currencies like the US Dollar has surged in recent session, as US-China trade tensions have deepened rather than lessened. Despite this, the US Dollar hasn’t benefitted from the market movement and was generally weak on Thursday.

The US Dollar’s strength is being weighed on by domestic factors, such as falling long-dated US Treasury yields and bets that the Federal Reserve could become more dovish next year.

As well as potential shifts in risk-sentiment, today’s US data could influence the US Dollar outlook if they surprise investors. US Non-Farm Payroll results from November and Michigan University consumer sentiment for December will round out the week.

Canadian Dollar News: Bank of Canada (BoC) Dovishness Weighs Heavily

The Canadian Dollar plunged on Thursday, allowing the Pound to Canadian Dollar exchange rate to more easily climb to its best levels since mid-November. On top of US-China trade tensions weighing on risk-correlated currencies, the Canadian Dollar was hit by domestic news too.

During a Thursday speech, Bank of Canada (BoC) Governor Stephen Poloz said that Canada’s economy was weaker than expected. The recent plunge in oil prices has put further pressure on Canada’s economic expectations and the oil-correlated Canadian Dollar.

Following the BoC’s more cautious tone over the past week, the Canadian Dollar may struggle to recover much today unless upcoming Canadian jobs market data is much stronger than expected.

Australian Dollar News: Australian Data Fails to Prevent ‘Aussie’ Plummet

A combination of poor Australian growth data and this week’s resurgent US-China trade jitters left the Australian Dollar plunging on Thursday. Australian retail sales data was decent, but not enough to distract from the market’s risk-off movement.

News that telecoms giant Huawei’s Chief Financial Officer, Meng Wanzhou, had been arrested in Canada caused shocks through markets and fears that this would only serve to deepen US-China trade tensions.

No notable Australian data will be published today, leaving the Australian Dollar sensitive to further developments in US-China trade tensions.

 

Upcoming Data

 

Friday, 7th December

07:00    German Industrial Production

07:45    French Trade Balance

07:45    French Industrial Production

10:00    Eurozone Employment Change

10:00    Eurozone Growth Rate

13:30    Canadian Employment Change

13:30    US Non-Farm Payrolls

15:00    US Michigan Consumer Sentiment

 

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

 

Arron Morris

Currency Trader

adm@fcgworld.co.uk

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