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The Pound is pounded by politics – again…

Published: Thursday 29 November 2018

  • European data expected today – will it help the Euro?
  • US Dollar weaker on central bank comments
  • New Zealand’s growth under threat from export troubles
​​​​By Alastair Sweetman
Sterling is still being whipped around by political rhetoric, as the Bank of England warned yesterday that if the UK were to endure a “No deal Brexit”, the worst case scenario would see growth fall by as much as 8%, Sterling may collapse by 25% and house prices as much as 30%. This was not a prediction, but simply one of the possible scenarios. Brexiteers will dismiss the projections, as warnings such as these had little effect before the referendum, it remains to be seen how UK ministers will react ahead of the vote on Mrs May’s Brussels agreement on 11th December. For now, the Pound will remain under pressure.
European data expected today – will it help the Euro?
On the European economic data calendar today, we have French Gross Domestic Product (GDP) figures; inflation and unemployment data from Germany; and Mortgage Approvals in the UK.
US Dollar weaker on central bank comments
The US Dollar weakened significantly yesterday, after comments from US Federal Reserve Chairman, Jerome Powell, hinted that the US economy is not flying as high as anticipated. Once again, central bank comments drag down the Dollar, in a similar vein to Mark Carney’s comments causing a further dip in the Pound.
The US Dollar fell aggressively after Powell surprised markets by stating that interest rates were just below neutral levels, signalling a significant departure from his comments back in October, when he said that they were a long way from neutral at this point. Analysts are now paring back predictions of aggressive interest rate hikes, particularly as the recent data has been weak and falling oil prices should lead to lower inflation. US President Trump will certainly be pleased that the Federal Reserve may pause the current monetary tightening cycle, as he has long stated that the rate hikes were unnecessary. The Dow rallied 600 points on the comments, even though a December rate increase is still likely.
Data-wise, we await US Personal Income and Jobless Claims, however, the Federal Open Market Committee (FOMC) minutes will be in sharp focus, considering Powell’s comments overnight, and markets will keep a close eye on any effect on the USD.
New Zealand’s growth under threat from export troubles
Overnight, New Zealand Business Confidence was reported as unchanged at -37.1 in November. Domestic growth was stable, but threats to growth are all offshore, with slowing global growth and falling stock markets all having a noticeable impact on New Zealand, which relies so much on exports and foreign capital.
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Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 09:30 UK: Net Lending in Individuals 4.7b 4.5b
GBP 09:30 UK: M4 Money Supply -0.3% 0.3%
GBP 09:30 UK: Mortgage Approvals 65k 65k
EUR 11:30 European Central Bank Financial Stability Review    
CAD 13:30 Canada: Current Account  -15.9b -11.9b
USD 13:30 US: Personal Consumption Expenditures Price Index  0.2% 0.2%
USD 13:30 US: Personal Spending 0.4% 0.4%
USD 13:30 US: Unemployment Claims 224k 221k
USD 19:00 Federal Reserve Meeting Minutes    

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