Daily Currency Update

The pound was sold off yesterday following the release of weaker than expected UK GDP, which printed at -0.4% month on month vs. expectations for 0.0% and +0.2% quarter on quarter vs. expectations for 0.3%. Weaker business investment was the main driver, likely a result of the Brexit impasse.

GBP/USD did rebound a little later in the morning as the dollar was offered early on in New York, but the trend lower has continued in Asia and GBP/USD opens closer to 1.28 than 1.29 this morning. It’s partly a result of a strengthening greenback and a flight into safety. The current Brexit uncertainty is hurting the pound too, of course.

Brexit headlines will continue to drive direction in GBP/USD. Both US and UK central bank heads are due to speak today too, and may say something monetary policy related, Brexit related, or US-China related that affects GBP/USD.

The dollar is stronger this morning, benefiting from a flight to safety. Investors are spooked by the lack of any real progression in US-China trade relations and the Brexit impasse. There wasn’t any US data released yesterday.

US-China trade talks will get most of the attention this week, but investors will also have half an eye on a speech by Fed Chair Powell, who’s due to speak at 5:45pm GMT today.

The euro is weaker this morning, falling below 1.1300 vs. the USD. We saw overall strength in the greenback on Monday as concerns grew that the latest round of U.S.-China talks may not yield a deal between the world’s largest economies.

On the data front there aren’t any relevant macroeconomic releases scheduled today. Looking ahead this week and tomorrow we will see the release of Industrial Production for the month of December. Then on Thursday, we will see the release of Q4 Gross Domestic Product for both Germany and the EU.

AUD/USD has been steady over the last 24 hours, if a little weaker because of a well bid dollar. Australian Home Loans data also printed weaker than expected overnight, which hasn’t helped the aussie dollar’s cause.

Focus for aussie dollar traders will likely be on US-China talks amid a lack of any top tier local data releases.

The Canadian dollar has been getting weaker vs. the US dollar over the last 24 hours. Opening at 1.3268, the CAD moved steadily lower with USD/CAD trading to a high of 1.3319. US crude oil has been volatile, which hasn’t helped the loonie’s plight; down sharply by 2.3% to $51 a barrel yesterday before recovering this morning to $52.80.

With global economic growth concerns at the forefront of investors’ minds, central banks continuing to downgrade forecasts on growth, as well as continued pressure on commodity prices and the recent slide in oil, the Canadian dollar is looking vulnerable right now.

NZD/USD has settled lower over the past few trading sessions, undermined by the prevailing risk off tone in markets.

We may see a steady range endure at least in the run up to the RBNZ Monetary Policy Statement due later tonight. The central bank is most likely to signal no change in interest rates but there are some expectations creeping in that Governor Orr may sound a little more dovish than he has in previous meetings. Traders are pricing in a 90% chance of a rate cut by November.