Shaky Sterling Slashed
The British Pound underperformed, accelerating downward this morning just ahead of the opening bell in Europe. The fall seems linked to dimming prospects for passing the Brexit deal championed by Prime Minister Theresa May.
UK banking-sector mortgage approvals increased to 39,700 for October from 38,700 the previous month and were above market expectations.
Prime Minister May outlined the Brexit deal to parliament following Sunday’s EU Summit. The opposition Labour Party maintained their determination to reject the deal and there were still strong expectations that the meaningful vote, likely to be held on December 11th, will see the government defeated which would create major political and economic uncertainty.
Markets continued to expect that parliament will reject the deal and Sterling was unable to make significant headway as it dipped to below 1.2800 this morning amid wider UK losses.
The US Dollar is widely mixed today after a quiet day for data yesterday. We await the Federal Reserve (Fed) Meeting on Wednesday where a rate hike is priced in by 78%.
A decent pickup in the US Dollar demand, further supported by resurfacing US-China trade tensions, prompted some fresh selling this morning. US President Donald Trump, in an interview with the Wall Street Journal, threatened to move ahead with raising tariffs on $200 billion of Chinese imports to 25% from 10% currently.
Fed Speaker Clarida said the Fed is monitoring external developments for possible headwinds but did not add Chair Powell’s caveat that such things will only impact policy if they alter progress on domestic objectives. The Dollar may rise if Clarida clarifies this in favour of the status quo, as seems likely.
In the US calendar, FOMC’s Evans, Clarida, Bostic and George are due to speak later ahead of the final Central Bank’s Consumer confidence gauge for the month of November. In addition, house prices tracked by the S&P-Case/Shiller Index are also expected.
Yesterday saw a number of speeches by European Central Bank (ECB) members, predominantly Draghi and Praet, in which they acknowledged that whilst economic growth momentum seemed to have slowed they both remained confident that the sustained convergence of inflation to their aim will continue.
German IFO business confidence index numbers seemed to reflect this, declining slightly which checked the Euro. Italian Deputy PM Salvini seemed to soften on his stance around the Italian budget and seemed to be open to negotiation which caused Italian yields to decline sharply, giving support to the Euro.
The Euro opened and closed around the 1.1350 mark versus the Dollar after having risen to 1.1370 during the day. Today sees virtually no economic data concerning the Euro, with analysts expecting a quiet day for the single currency.
Data to Watch:
n/a USD OPEC meeting
13:30 USD FOMC Member Clarida speech
14:00 USD S&P/Case-Shiller Home Price Indices (YoY) (Sep)
14:00 USD Housing Price Index (MoM) (Sep)
16:00 EUR ECB’s Mersch speech
19:30 USD FOMC Member Bostic speech
20:00 NZD RBNZ Financial Stability Report
22:00 NZD RBNZ Governor Orr Speech