UK exports hit record high in October
With the European Central Bank (ECB) out of the way, investor attention has now turned back towards the US. As the Federal Reserve’s (Fed) policy-setting committee meets next week, the possibility of the Fed increasing interest rates has been almost fully priced in by the market and now clues about the monetary policy in 2017 is awaited.
On the data front, today, trade figures from both sides of the English Channel crossed the wires. In Britain, goods trade deficit narrowed as exports surged to a record high and German exports recovered in October. Reports on consumer sentiment and wholesale inventories are due to be released from the US data docket later today.
Pound Sterling – UK Markets
The Pound is trading on a stronger footing against the US Dollar and the shared currency this morning. The just out data showed that UK’s goods trade deficit narrowed in October. Meanwhile, the nation’s seasonally adjusted construction output unexpectedly declined in October, compared to the gain registered in September. Looking ahead, next week is a crucial one for Britain. The Bank of England’s monetary policy meeting is scheduled to be held next week along with the release of several important economic data points. These include the UK’s consumer price index, unemployment rate, average earnings and retail sales data.
Yesterday, the UK’s Supreme Court wrapped up four days of intensely contested argument on the government’s appeal that whether the British Prime Minister, Theresa May, can trigger Britain's exit from the European Union (EU) by the end of March without Parliament's consent. The Supreme Court upheld that it will not “overturn the result of the EU referendum” and assured that a decision will be arrived at “as soon as possible.”
US Dollar – US Markets
The US Dollar is trading lower against the Euro and Sterling this morning. Investors will be looking ahead to today's US economic data points which include wholesale trade sales data and Michigan consumer sentiment index. The flash print for consumer sentiment index is likely to register a modest increase for December, following a significant rebound in the previous month. Moreover, wholesale inventories are anticipated to remain steady for October. Next week, traders will swiftly shift focus to Federal Open Market Committee’s final monetary policy meeting for 2016, where the central bank is largely expected to increase the key interest rate after it last raised the rate in December 2015.
Yesterday, the greenback strengthened against the shared currency, following the ECB’s decision to extend its bond-buying programme until December 2017, albeit it reduced the size of the purchases. On the release front, the US Labour Department revealed that the number of people in the US applying for new jobless benefits fell last week, showing signs of a healthy labour market.
Euro – European Markets
The shared currency moved upward quickly, followed by a sudden downward movement after the ECB's announcement yesterday. The Euro rallied against the US Dollar in an initial knee-jerk reaction, as investors concluded that the central bank was tapering its quantitative easing programme. However, the Euro weakened against its major peers, after the central bank announced continuation of its asset purchase programme for an additional nine months. Nevertheless, the bank stated that the purchases will be scaled down to a monthly pace of €60.0 billion beginning April 2017 from the current volume of €80.0 billion. The ECB President, Mario Draghi, also stressed that the stimulus programme would be extended until the end of next year, or beyond, if inflation target in the common currency region is not met. Meanwhile, the ECB kept benchmark interest rate unchanged.
Today, on the data front, Germany’s seasonally adjusted trade surplus narrowed in October, as imports topped market forecast while exports rebounded less than expected during the same period. In other economic news, French manufacturing and industrial production recorded an unexpected drop in October.
Other Currencies – Highlights
The Australian Dollar has reversed its previous session losses and is trading higher against the greenback this morning. Data released earlier in the session showed that the number of new home loans granted in Australia fell less than anticipated in October. Meanwhile in China, Australia’s largest trading partner, consumer prices rose above expectations in November, backed mainly by a surge in vegetable prices. Moreover, the nation’s producer prices advanced to a 5-year high during the same month, as prices of coal, steel and other building materials soared, rendering a much-needed boost to industrial profits.
During the previous session, the Australian dollar ended lower against its US counterpart, as the US Dollar witnessed a bullish charge across the board. On the data front, Australia’s trade deficit worsened in October, as growth in imports outpaced that of exports. Separately, the Australian economy recorded negative quarterly growth for the first time in over five years in 3Q 2016, amid steep falls in business investment, housing construction and public spending.