- Japanese Yen strengthens on better than expected Gross Domestic Product and investor fear
- Lower interest rates trending, especially in Asia Pacific
- Antipodean central banks club together
- Beware Canadian Dollar movement
We’ve spent the last three years being told how rubbish Britain is and how grateful we ought to be to the EU, but I heard someone actually talking the UK up this morning – and on Radio 4, no less. Was it a British politician? Nope. Was it a BBC reporter? No, of course it wasn’t; it was a very experienced US trade negotiator discussing how the US would definitely like to agree a trade deal with the UK. What a breath of fresh air.
Japanese Yen benefits from US-China trade tensions
In the forex markets, the Japanese Yen has benefitted from safe haven buying by mostly Asian investors, whilst the Sino-US trade disagreement rages on. So much so that the USDJPY rate dropped overnight to levels we haven’t seen since March 2018. That was aided by Japan’s economic growth rate beating forecasts, which were expected to be quite gloomy.
More political pressures for the Pound
Stories are circulating around the tactics that may be deployed by Prime Minister Boris Johnson to ensure the UK leaves the EU on 31st
October and perhaps to call a snap election straight after that. The leader of the opposition has asked the UK’s senior civil servant to rule on whether the Prime Minister can actually call an election and then let the UK leave the EU during the electioneering period known as Purdah. It is likely that, as the law to leave the EU was passed much earlier, this isn’t a breach. Ooh, it is all really intense at Westminster, isn’t it? Sterling simply cannot regain any strength whilst it is being sapped by politics. I think we all know that feeling.
We will get UK economic growth data at 9.30am (UK Time) today. Zero growth in the three months to June is the forecast, but that would still leave some annualised growth in the data. Anything above 0% on the quarter may well give Sterling a little fillip. Be ready. That Gross Domestic Product (GDP) data will be accompanied by, what are forecast to be, rather poor UK industrial and manufacturing data.
Central bank concerns bring Antipodean allies together
The Reserve Bank of Australia has joined its counterpart in New Zealand to talk about extraordinary measures necessary if the Australian economy slows any further. Negative interest rates have been mooted. That really would be an extraordinary move for a bank that has traditionally boasted higher rates than anything in the northern hemisphere. They are not alone, though; New Zealand, India, the Philippines and Thailand have all cut their base rates this past week and, unless the US and China sort their acts out, we are likely to see further cuts from more central banks in the weeks ahead.
Speaking of China, the People’s Bank of China (China’s central bank) lowered the peg on the value of the Yuan to an 11 year low against the US Dollar today. That’ll bring further accusations of currency manipulation…
Be prepared for Canadian Dollar movement
This afternoon brings producer price indices (PPI) from the US and a swathe of Canadian data. The Canucks will deliver house building and market data, as well as their employment report. The unemployment rate of 5.5% is unlikely to change, but the data will impact the Canadian Dollar, so be ready if that is important to you.