Thin holiday trade caused the Pound to fluctuate against the majors over the past few days but a lack of fresh data, or indeed appetite for major moves that could unsettle a pleasant Christmas dinner with the family, meant that Sterling did not sustain any great losses or celebrate any substantial gains.
The last piece of economic data before the Christmas period proper was the Office for National Statistics’ latest third quarter GDP revision. The ONS surprised markets by upgrading Britain’s Q3 growth score from 0.5% to 0.6%, with much of the expansion coming courtesy of robust consumer demand and solid service sector output. The data suggests that Brexit has not yet had a material impact on domestic economic trends, however, the majority of analysts anticipate a slowdown in 2017 as rising inflation squeezes consumers’ spending power.
The Pound to Euro exchange rate had slid by around a third of a cent over the last few days, with some traders quoting fears of a shift back towards a ‘hard Brexit’ as reason to be cautious regarding Sterling.
On Boxing Day former Bank of England Chief Mervyn King said that it made no sense for Britain to pursue a future within the single market after Brexit. King said the historic referendum result gave Britain the chance to forge new trade deals with the world and assume greater controls over immigration. The former BoE Governor added: ‘being out of what is a pretty unsuccessful European Union – particularly in the economic sense – gives us opportunities as well as obviously great political difficulties’.
The majority of market analysts predict that maintaining access to the single market would ensure a smoother path for British businesses and subsequently talk like King’s of giving up access to the single market is capable of hurting the Pound.
Sterling lost a little bit of ground to the US Dollar yesterday following a report showing that US consumer confidence rocketed to its highest level since 2001 in December.
The confidence index jumped from 109.4 to a 15-year high of 113.7 as US households bet that President-elect Donald Trump’s plans to spend big on infrastructure would lead to stronger economic growth, job creation and higher wages. The Pound is currently trading close to its lowest level versus the ‘Greenback’ since the beginning of November.
The Canadian Dollar fell by over half a cent versus the Pound yesterday despite news that the nation’s largest raw export rallied 1.7% ahead of the New Year. Crude ticked higher in anticipation of the first output cut deal between OPEC and non-OPEC members for 15 years, which is due to kick in on January 1. Oil has rallied 25% since November, when the production cuts were initially put forward, but the Pound has actually rallied versus the ‘Loonie’ during that time.
Fears over China’s 2017 growth prospects weighed on the Australian Dollar slightly yesterday following comments from Chinese President Xi Jinping suggesting that China, one of Australia’s primary trading partners, may not stick to a target of achieving 6.5% annual growth next year. The risk sensitive ‘Aussie’ is also suffering from concerns that higher interest rates in the US may deter traders from investing in the notoriously volatile Antipodean currency.
The Pound to New Zealand Dollar exchange rate remained fairly flat yesterday ahead of UK mortgage data, which is expected to show that loans for house purchases increased from 40,851 to 41,100 in November. The housing market data is unlikely to have a massive impact on GBP trading, however, it is the only ecostat of note due for release during today’s session.
09:30 GBP BBA Loans for House Purchase (NOV) Medium 41100
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