GBP: Sterling Still Reeling from Last Week’s Negative Data Prints
The Pound has begun this week edging away from last week’s negative trade data induced lows. Notably, Friday saw the announcement that the total UK trade deficit had widened by £1bn between April and May, mostly due to a surge in the importation of transport equipment, electrical machinery and oil from countries that are outside of the European Union. UK industrial production, construction output and manufacturing production output also all fell across the board; a wave of negative prints that followed on from disappointing PMIs earlier in the week.
This spate of data spelled bad things for the UK economy and indeed turned investors away from Sterling, as the UK’s struggling economy could prevent the Bank of England’s (BoE) Monetary Policy Committee from voting for future adjustments to monetary policy.
There are no significant UK data releases today, but this Wednesday we will see the release of the UK employment market data, that includes prints on jobless claims, average weekly earnings and the unemployment rate – with average weekly earnings (excluding bonuses) expected to have risen from 1.7% to 1.9%. Average weekly earnings including bonuses are believed to have fallen from 2.1% to 1.8% and the unemployment rate is expected to remain the same.
EUR: Widening German Surplus Propels Euro
The Euro has begun this week on reasonably sturdy form but was largely unmoved by a notable increase in the German trade surplus.
The May surplus widened from 18.1bn to 22bn as exports continued to outdo imports.
However, Chief Economist at ING, Carsten Brzeski, spoke on the future of German exports and their relation to the single currency:
‘Looking ahead, the current upswing of exports should be taken with a pinch of salt. Given the high exchange rate sensitivity of German exports to the US, the latest appreciation of the Euro could leave some marks on the German exports sector in the coming months. Also, the Brexit impact is very unlikely to go away any time soon. These potential downward risks can only be offset by a further strengthening of the Eurozone economy.’
USD: Strong US NFP Data Pushes GBP/USD Lower
‘Cable’ suffered on Friday as disappointing UK trade data and a positive US non-farm payroll (NFP) report sent the pairing to new weekly lows.
June’s US NFP figure printed at 222k, far higher than the expected 178k and significantly higher than the previous month’s figure of 152k, a result that added fuel to the fires of interest rate hike speculation and further propelled the US Dollar (rate hike bets are currently around 60%).
All eyes will be on Federal Reserve Chairwoman Janet Yellen this Wednesday and Thursday as she testifies to Congress regarding the Fed’s biannual monetary policy report. If investors pick up on a perceived hawkish sentiment then the US Dollar will likely surge.
CAD: Crude Oil Down on the Day, Canadian Dollar Stumbles
The Canadian Dollar has struggled this morning as oil prices have dipped, even as OPEC signalled that they will widen their production caps to include Libya and Nigeria, nations whose output has recovered somewhat following years of civil unrest.
Investors are waiting with baited breath for the Bank of Canada rate decision, due on Wednesday. Currently a rate hike to 0.75% is predicted, a move which could send the Canadian Dollar rocketing higher.
AUD: GBP/AUD Exchange Rate Remains within Relatively Narrow Band
Friday saw no remarkable domestic data releases for Australia, but the GBP/AUD exchange rate stumbled regardless – primarily as a result of a Pound being heavily buffeted by repeated negative data releases.
As this trading week opens the Australian Dollar itself has remained relatively quiet, with a lack of significant data due until later in the week. Iron ore is up today however, giving the ‘Aussie’ a little lift.
NZD: GBP/NZD Falls to Nine-Day Low
Friday saw the Pound struggling against the New Zealand Dollar as GBP exchange rates endured hit after hit of negative data releases, eventually dropping to a fresh nine-day low against the ‘Kiwi’ Dollar.
It’s been a somewhat quiet opening to the trading week for the New Zealand Dollar this morning, with the ‘Kiwi’ Dollar seeing small gains against various majors but a slight dip against Sterling.
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