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November 2017

Weekly Currency Insights from Halo Financial

Published: Monday 13 November 2017

What you may have missed…
  • Sterling struggles after starting week in recovery mode
  • Australian Dollar dips a little on central bank speech
  • Europe looks ahead to growth – but downgrades UK outlook
  • US Dollar weakens a little following tax changes plan
By Rachael Kinsella
 
Sterling struggles after starting week in recovery mode

The Pound has been a victim of politics this week, with concerns about Theresa May’s Prime Ministership and musical chairs in the cabinet making markets nervous.

House price growth has fallen in the UK, which also had a knock on effect on the Pound this week.

As expected, manufacturing data was positive – the latest results showed output in the manufacturing sector rose by 0.7% throughout September 2017 and 2.7% for the year. 

The UK Gross Domestic Product (GDP) estimate from the National Institute of Economic and Social Research (NIESR) also came out better than expected, anticipating a 0.5% increase in growth for August-October 2017, an increase from the forecast of 0.4% in September. The forecast expects strengthening demand for international trade in response to a growing global economy.

Australian Dollar dips a little on central bank speech

The Australian Dollar fell slightly following the Reserve Bank of Australia’s (RBA) interest rate announcement, where the central bank shows no signs of raising rates any time soon. They kept their 3.0% growth forecasts for the next few years and mentioned that they expect to see unemployment fall below 5.5% and then to decline over a period of time.
 
 
New Zealand Dollar takes a hit

The Reserve Bank of New Zealand also kept their interest rates at current lows, although the content of the speech hinted that they may need to raise rates sooner than anticipated, owing to rising inflation. The central bank now expects to increase interest rates in under two years’ time. This knocked the New Zealand Dollar for six and the NZ currency fell more than 1%.

Europe looks ahead to growth – but downgrades UK outlook

The European Commission has slashed the UK growth rate outlook for next year and 2019, in contrast to an improved outlook across the rest of Europe.

US Dollar weakens a little following tax changes plan

Traders reacted to the US Senate’s tax reforms approach towards the end of the week with a weaker US Dollar.
 

What to look out for this week

UK awaits key economic announcements this week

The UK Chancellor of the Exchequer is expecting his pre-Budget economic report this week. All the key UK economic announcements that have affected the Pound in recent weeks will be there: falling real wage growth, despite employment being at record levels, squeezed consumers as inflation bites, and the implications of a weaker Pound since the Brexit vote.

UK inflation figures are due to be released on Tuesday 14th November, Consumer Price Inflation (CPI) is forecast to increase to 3.1% in October, showing a 0.2% rise from the previous month’s figures.

The next day will see the publication of the Office for National Statistics (ONS) labour market report, expecting to show unemployment still close to 4.3%; and while unemployment is anticipated to remain at 40-year lows, wage growth is likely to show weakening growth and the forecast is for just 2.0% growth for the year.
 
Then on Thursday 16th November, the also closely-watched retail sales figures will be released. The forecast is for no change from the previous month, after the surprise drop in September. There will also be UK British policymaker speeches in Liverpool, which could provide insights into the future of the UK economy.

US also expects key economic data

The Federal Budget Balance will be announced this evening.
The next data that could move the US Dollar will be on Wednesday 15th November, the US Bureau of Labor Statistics will release the latest Consumer Price Inflation and retail sales data.

German economic sentiment a key indicator for Eurozone

The closely watched German ZEW Economic Sentiment Index on Tuesday 14th November may offer insights into the Eurozone’s overall economic performance.

Australian business and consumer confidence – high or low?

Australian business confidence data is expected in the early hours of Tuesday 14th November and consumer confidence data is also expected on the same day. Last month, business confidence was high and consumer sentiment was lower, following increased consumer cost pressures from the housing market and lacklustre wage growth.

Australian wage price data will also be released on 15th November and is forecast to show improvement on the last quarter. This could have the potential to boost the Australian Dollar, but the AUD could also be affected by Chinese retail sales and industrial production data release at around the same time, given the countries’ close export/import relationship.

#MondayMotivation

Count each day as a separate life.” Seneca

“Just because you do not take an interest in politics doesn't mean politics won't take an interest in you.” Pericles

“Ignorance is the root and stem of all evil.” Plato