UK Budget Deficit Falls in May, Traders Await Queen’s Speech
Sterling continued its downward trend this morning following yesterday’s dovish Bank of England (BoE) announcement. BoE Governor Mark Carney laid any hopes of a rate hike to rest, citing ‘anaemic wage growth’, consumer spending, business investment and Brexit uncertainty as contributing factors to his cautious outlook.
Today’s movements for Sterling will largely be dictated by news regarding the Queen’s speech and the start of a new parliament. The event is set to go ahead, despite previous delays and the lack of finalised negotiations with Northern Ireland’s DUP – it is reported that Brexit will dominate proceedings.
The Bank of England’s Chief Economist Andy Haldane is due to give a speech around midday. If the speech is dovish in nature, much like Carney’s, then Sterling could see more losses.
New figures from the Office for National Statistics showed that UK public sector borrowing is down -£100mn for the first two months of the year, with the UK borrowing £6.7bn in May – down from £7bn in May of 2016. Sterling, however, continues in its slump against most of the majors with the positive data release likely overshadowed by political uncertainty.
Pound Euro Slides, EU Chancellor Suggests a Softer Approach to Brexit
Pound to Euro exchange rates continue to drop following yesterday’s dovish BoE announcement; news that, unfortunately, overshadowed announcements that Brexit negotiations had started off on somewhat of a positive note.
Chancellor Philip Hammond discussed a softer approach to Brexit, discussing things like agreements for trade, an amicable customs arrangement and a transitional deal following the 2019 deadline – a change in stance from the pre-election hard bargain mentality.
US Dollar Remains Strong, Republican Lead Strengthens
Yesterday saw ‘Cable’ crash to a two-month low as hopes of interest rate hikes in the coming months were quashed.
Republican Karen Handel defeated Democrat rival Jon Ossoff last night – the party’s fourth consecutive defeat this year as they attempted to win Republican seats to gather some momentum for the 2018 midterms. The victory further solidified the Republican lead.
The US Dollar continues to progress against most of the majors, with New York Federal Reserve President William Dudley’s hawkish statements earlier in the week pushing traders to buy.
Sterling Continues to Drop against the Canadian Dollar
Sterling tumbled against the Canadian Dollar yesterday, reaching a two-month low as the threat of continued low interest rates continued to weigh on the currency.
The ‘Loonie’, suffering from news of the global oil glut, is dropping against most of the majors.Keep a keen eye on today’s US Oil Inventories release, as higher than expected numbers will cause further drops.
Reserve Bank of Australia Minutes Support Australian Dollar
Sterling fell against the Australian Dollar to its lowest levels since March yesterday as UK rate expectations incited selling.
Last night saw the Australian Dollar sink in response to its US counterpart rising higher. In addition, the Reserve Bank of Australia (RBA) released the minutes from their monetary policy meeting.
They noted that policymakers were keeping a keen eye on the labour and housing markets, so data on these subjects could prove significant in fostering hawkish attitudes.
The New Zealand Dollar Falls on Dairy Price Drop
Sterling hit three-month lows yesterday as traders abandoned ship in response to the uncertainties of Brexit, reduced rate hike bets and concerns over the UK’s credit rating.
The New Zealand Dollar itself suffered yesterday, with global dairy prices slipping at the Global Dairy Trade Auction – a drop that broke their winning streak of six successive increases.
The Reserve Bank of New Zealand (RBNZ) is expected to maintain rates at 1.75% later this evening, but any expression of hawkish sentiment could strengthen the antipodean currency against the Pound.
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