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March 2017

Sterling slips as USD surges

Published: Thursday 02 March 2017

  • Sterling slips as USD surges
  • Mixed Australian Data lets AUD strengthen 
  • Canadian data should weaken CAD
By David Johnson
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Australia’s trade surplus narrowed sharply in January. That was not at all anticipated by anyone in the markets and the Australian Dollar weakened a little against most other currencies, but that effect was muted after very strong GDP data released earlier in the day yesterday. 
 
The Sterling – Australian Dollar rate, like most GBP related exchange rates, is a little lower today, though. In spite of another positive UK manufacturing sector index, showing the ninth straight increase in export trade. As I will comment below, the improvement in demand for the US Dollar has weakened the Pound more than it has weakened the Euro or the Australasian currencies at this stage.
 
The US Dollar reacted positively to both the President’s speech and to the hawkish tone from the US Federal Reserve. Most analysts are predicting two or maybe three interest rate hikes in the US this year and that would mean the strong US Dollar offers a strong yield as well; an alluring combination for international investors. Moths and candles spring to mind. The significant improvement in American manufacturing sentiment added to that USD strength.
 
That discrepancy between the Pound and Euro strength may have something to do with the fact that Eurozone manufacturing is at a 70 month high. The effect could well be over-stated though, because the data was coming from a very low ebb, but it is positive for the euro nonetheless.
 
This morning brings UK Construction Sentiment and Eurozone employment data. The former is expected to be rather flat and the latter likewise. We also expect Eurozone producer price inflation to have picked up. This all suggests the GBP-EUR rate may be under further downward pressure today.
 
The Bank of Canada left all their base rates on hold yesterday and this afternoon’s Canadian Gross Domestic Product (GDP) growth data should support their view that Canada isn’t out of the woods yet. We suspect GDP growth in December will be slightly slower that the November number and that will allow the Canadian Dollar to weaken a tad.
 
And everyone is supposed to have a bucket list; a to-do list of the things that they want to happen before they kick said bucket. Well, one 99 year old in Holland has had one of her wishes come true. She wanted to be arrested and imprisoned in a police cell and the Police have obliged. And Annie didn’t even need to commit a crime. Personally, I can think of better things to wish for.
 

Joke

 
Two Highway Patrol Officers stopped a guy for speeding on the state highway in Waxahachie, Texas. As they were writing up the ticket, one officer turned to the other and said, "How do you spell Waxahachie?"
The other one replied, "I don't know."
So the first one said, "Well if I spell it wrong, some smart lawyer will get the ticket dismissed."
The second officer walks back to the driver and says, “Where are you heading for Son?”
“Dallas,” says the nervous driver.
He walks back to his partner and says, “You heard him. Let him go. We’ll stop him when he gets to Red Oak.” 
 
 

Today's Major Economic Releases
 

Market
BST
Data/Event
Previous
Expected
GBP 09:30 UK: Construction Purchasing Managers' Index 52.2 52.2
EUR 10:00 EU: Consumer Price Index Flash Estimate 1.8% 1.8%
EUR 10:00 EU: Core Consumer Price Index Flash Estimate 0.9% 0.9%
EUR 10:00 EU: Producer Price Index 0.7% 0.5%
EUR 10:00 EU: Unemployment Rate 9.6% 9.6%
CAD 13:30 Canada: Gross Domestic Product 0.4% 0.3%
USD 13:30 US: Unemployment Claims 244k 243k

For more information, infographics and the latest currency insights, visit www.halofinancial.com/blog
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