Plummeting Pound, Problems Prevail
The Pound took the market on a roller coaster ride yesterday following news British parliamentarians were supporting Prime Minister May’s Brexit divorce deal negotiations.
A Sterling sell-off began after reports that the Cabinet is not close enough to agreeing on a way forward for top-level Brexit negotiations to resume and that there will almost certainly be no new plan put forward by the British side before next Monday’s budget. European Central Bank (ECB) President Mario Draghi was less than supportive, warning of a no-deal Brexit should there be no agreement soon. The Pound fell half a percentage point against the Dollar to 1.2808, but it has since rebounded to 1.2822.
In the absence of any major market-moving UK economic data, the incoming Brexit headlines might continue to influence sentiment surrounding the British Pound and remain a key driver of its momentum.
Headline September US durable goods orders increased 0.8%, above consensus forecasts of a 1.3% decline, but the core increase was held at 0.1%, maintaining some doubts over investment trends, but the labour-market data remained strong. The September goods trade deficit increased to a record high of $76.0bn from $75.5bn the previous month as growth in exports was out-paced by stronger imports.
The data will increase potential concerns surrounding the US budget and current account deficits. There will also be a slightly negative impact on third-quarter GDP data and could inflame trade tensions.
Later this afternoon, we see the advance US Q3 GDP print, expected to show that growth slowed to 3.3% annualized.
Yesterday saw the single currency slide further against both Sterling and the Dollar. ECB President Draghi left interest rates unchanged and there were no changes to the bond-purchasing programme. The market expected both of these announcements so there was little gain to this positive news. He did mention that ECB fiscal rules needed to be adhered to, but that they were open to a dialogue with Italy.
One point of interest was that he mentioned that stimulus is needed for inflation despite there being evidence of a loss in momentum. After briefly hitting the 1.1400 level against the Dollar, the Euro promptly fell to 1.1355. Against the Pound, the currency dipped below the 1.1300 level.
There is virtually no data due out today in the Eurozone apart from this afternoon when President Draghi is due to give another speech.
Data to Watch:
12:30 USD Gross Domestic Product Price Index (Q3)
12:30 USD Gross Domestic Product Annualized (Q3)
12:30 USD Personal Consumption Expenditures Prices (QoQ) (Q3)
12:30 USD Core Personal Consumption Expenditures (QoQ) (Q3)
17:00 USD Baker Hughes US Oil Rig Count