China property sector debt concerns boost JPY as safe haven

Traders in the far east who are concerned about the debt problems evident amongst Chinese property developers are moving their funds to the safe-haven Japanese Yen. The GBPJPY rate is 75 basis points down on the overnight highs but still more than 1 Yen above the lows we saw at the end of last week.

NZD strengthens despite largest trade deficit since Feb 2020

The overnight market was busy in Australasia as well. The ANZ New Zealand business confidence index for October came in at minus 13.4. That’s nearly twice as bad as the previous month and that data was published just after we saw the worst New Zealand trade deficit since February 2020. Undoubtedly, New Zealand exporters need Australian and Chinese importers to significantly increase demand. The GBPNZD rate has still managed to push below NZD 1.92 this morning. That is the lower end of its current range between NZD 1.9180 and 1.93.

Australian inflation lower than forecast

Australian consumer price inflation was marginally lower than expected in the data published early this morning. The annual rate of inflation came in at 3.0%, down from last month 3.8% level and a shade under the  3.1% market forecast. As with all economies at the moment, the focus is on whether the central bank; in this case, the Reserve Bank of Australia, is ready to start raising interest rates to ward off inflation. Whilst 3% he’s at the top end of the RBA’s target range, it’s unlikely to prompt an early rate hike. Nonetheless, the GBPAUD rate has given back yesterday’s gains and starts this morning in the UK at AUD 1.8280.

The GBPEUR rate managed to test €1.19 yesterday but is back below the previous €1.1875 ceiling this morning. The jargon-bunnies amongst us would call that a ‘false break’. It doesn’t mean the Pound won’t have another crack at a rally but traders will be reassessing this morning. We lack data from either side of The Channel today but euro traders will be bracing themselves for tomorrow’s European Central Bank meeting. It is highly unlikely ECB will move their base rate but there is every chance they will reduce their bond-buying programme. That should strengthen the euro but it is hard to know if that will happen in these uncertain times.

It wasn’t just against the Euro that Sterling delivered a spike yesterday. GBPUSD also shows a spike on the chart. This one went to $1.3830 before dropping back to this morning’s $1.3775. There were a number of reasons to buy the Pound yesterday. UK retail sales were surprisingly strong, although supply chain problems held the market back. UK wage rises hit their highest level since 2008 and – somewhat related – UK inflation expectations were also at their highest levels since 2008. Against that background, it is no surprise that speculation over early Bank of England interest rate rises is at fever-pitch.

Bank of Canada likely on hold

Speaking of central banks, The Bank of Canada will make its interest rate announcements this afternoon. Their 0.25% base rate would seem pretty safe for now but future planning is what traders will be looking for in the BOC’s statement. GBPCAD starts the day at CAD 1.7050 and that is the middle of a range of less than a cent at the moment.

And here’s an interesting fact to start Wednesday. Most people have 206 bones in their body but more than a quarter of them are in your feet. A pair of intact feet contain 52 bones and each hand contains 27 bones. So your hands and feet contain more than half the bones in your body. Oh and you are looking at your hand right now, aren’t you? Now stop that and get on with your day.

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