The Pound lost ground against most of the majors yesterday as Britain’s uncertain economic future continued to put a dampener on the domestic currency ahead of the New Year.
The day’s only UK data release showed that UK mortgage approvals fell unexpectedly in November. The report from the British Bankers Association (BBA) saw home loans dip from 40,835 to 40,659, disappointing forecasts of 41,400. A separate report released recently indicated that buyer enquiries dropped for a third month in a row in November and analysts are starting to look at the possibility that the UK housing market could struggle a little bit next year.
The Sterling to Euro exchange rate ticked higher yesterday afternoon but the Pound failed to hold onto those gains during the evening.
There is little data on the calendar to look out for today and as such we are unlikely to see any large moves in GBP/EUR. The big themes going into 2017 will likely revolve around nationalism: if Britain maintains access to the single market then the Pound could strengthen versus the single currency, whereas a post-Brexit trade deal that gives the UK greater immigration controls at the cost of single market access could drag Sterling lower.
In Europe, it is general elections in Holland, France and Germany that are important. The Euro stands to lose out approaching each vote but could recover if anti-EU parties don’t make an impact. However, if nationalist populist parties perform well – à la Brexit and Trump – then we could see the Euro buckle under the threat of currency bloc unravelling.
The Pound to US Dollar exchange rate tumbled half a cent towards two-month lows yesterday as Brexit jitters, bullish Trump bets and the hawkish Federal Reserve weighed on GBP/USD.
The FTSE 100 UK stock index closed at an all-time high of 7106 yesterday, driven by London listed mining stocks, which are rallying in anticipation of large-scale US infrastructure projects next year. Although the Footsie has surged 12% since the EU referendum in June, the Pound has softened 17% against the US Dollar in that period. Three quarters of the companies listed on the index operate abroad, which means that profits posted in foreign currencies are boosted when returned into Sterling. This makes the FTSE a fairly unreliable gauge of UK economic performance and explains why the Pound did not receive much love on financial markets yesterday.
The Pound lost over -120 pips to the Canadian Dollar yesterday as Brexit jitters depressed demand for Sterling and oil price rises bolstered the appeal of the ‘Loonie’. The commodity-sensitive Canadian Dollar is liable to fluctuate in tandem with crude prices because oil is the nation’s most lucrative raw export.
Sterling softened by around -60 pips against the Australian Dollar yesterday as market sentiment remained sour ahead of a potentially difficult year for the UK economy. There is little on the economic calendar today so we could see GBP/AUD trade within a one-cent range.
The Pound to New Zealand Dollar exchange rate plunged -130 pips yesterday to strike a fortnightly low as traders sold Sterling in anticipation of an uncertain year for Britian.
13:30 USD Advance Goods Trade Balance (NOV) High -$61.5b
© TorFX. Unauthorised copying or re-wording of this blog content is prohibited. The copyright of this content is owned by Tor Currency Exchange Ltd. Any unauthorised copying or re-wording will constitute an infringement of copyright.