GBP - British Pound
Friday's trade was still feeling the effects of Thursday's Bank Of England fallout. A 7-2 vote in favour of holding interest rates for now was the result but the big surprise was the 2 in favour of a rate cut. Its long been a view of the central bank they would need to act on a ‘no deal’ Brexit but giving where we are at the moment on the Brexit trail it seems as though a cut could be on the cards regardless of the Brexit outcome.
With the election campaign in full swing early polls have shown the conservative lead is widening, this is helping the Pound hold on to its gains as the chance of a ‘no deal’ Brexit diminish. Away from the campaign trail the UK economy was given another blow after UK’s credit rating was downgraded by Moodys. The ratings agency, which scores debt on the basis of how likely they (the government) are to default, changed the outlook on its Aa2 rating on the debt issued by the UK government from "stable" to "negative".
Big news for today will come from the Prelim GDP at 9.30 this morning. It is expected to show the economy grew at 0.4% in the third quarter, after contracting in the second. A senior adviser to Cambridge Econometrics, Mr Sentance said it "means that over two quarters the economy has really been growing very slowly, at a rate of less than 1% a year. So I think the picture we are getting for the UK economy is not necessarily recession but it is of slow growth".
Cable briefly dipped below 1.28 on Friday to its lowest level since Mid-October, it has since re-bounded and currently hovers around the 1.28 handle.
Investors will be focusing on appearances by U.S. President Donald Trump and Federal Reserve Chairman Jerome Powell this week amid fresh doubts over the progress of trade talks between the U.S. and China. The dollar held near multi-week highs during the Asian session amid optimism that the United States and China would roll back tariffs that have hurt global growth, this being pitched as ‘Phase one’. Officials from both countries said late last week that a rollback of some tit-for-tat tariffs had been agreed as part of a preliminary deal, that has still to be finalised, aimed at ending the trade war. This has since been denied by Trump but didn’t completely rule out a deal. It appears the tit-for-tat continues and expect this to rumble on.
The US will observe Veterans day today so data will be thin for the afternoon.
On the macro view, the outlook in Euroland remains fragile and does nothing but justify the ‘looser for longer’ monetary stance by the ECB and the bearish view on the single currency in the medium term at least. In addition, the possibility that the German economy could slip into recession in Q3 remains a palpable risk for the outlook and is expected to weigh further on EUR in the short/medium term horizon.
1.1570 - 1.1690 ▲GBP/USD:
1.2750 - 1.2870 ▼GBP/AUD:
1.8550 - 1.8710 ▼GBP/NZD:
1.9965 - 2.0260 ▲