Brexit and Employment Figures Keep the GBP in the Spotlight

A mixed start to the day on the data front, leaves the markets to look ahead to employment numbers out of the UK, the Pound find strong Brexit support.
Bob Mason
GBP/USD daily chart, June 29, 2018
Pound currency background – 20 Pounds – Rainbow

Earlier in the Day:

Economic data released through the Asian session this morning included August electronic card retail sales figures out of New Zealand and August business confidence numbers out of Australia, with tertiary industry activity index numbers out of Japan due out later in the session

For the Kiwi Dollar, August electronic card retail sales rose by 1% month-on-month, following a downwardly revised 0.2% rise in July, with sales rising by 6.3% year-on-year, up from a revised 3.8% in July. According to figures released by NZStats:

  • The increase in spending was attributed to a rise in fuel prices that contributed to a 4.1% rise in spending on fuel.
  • Spending elsewhere was also on the rise, with spending on durables and consumables (grocery and liquor) up by 1.2% and 0.6% respectively.
  • Core retail spending, which excludes vehicle-related industries, rose by 0.7% following a 0.3% rise in July, core retail spending up for a 4th consecutive month.

The Kiwi Dollar moved from $0.65221 to $0.65238 upon release of the figures before rising to $0.6525 at the time of writing, down 0.02% for the session.

For the Aussie Dollar, the NAB Business Confidence Index fell from +7 to +4 in August, coming in below a forecasted fall to +5.

  • The business conditions index rose by 3 points to +15, recovering from a previous month fall, while business sentiment towards the prospects of the Australian economy eased to the lowest level since Aug-16.
  • In spite of the decline in confidence, the forward orders sub-index rose by 3 points to +5.
  • On the labour front, the labour costs sub-index rose from +0.9 to +1.3, supporting the RBA’s view of a continued fall in the unemployment rate.

While political uncertainty will have been an influence on business confidence, the ongoing trade war between the U.S and China and economic uncertainty ahead may also have contributed to the fall.

The Aussie Dollar moved from $ 0.71011 to $0.70966 upon release of the figures, before recovering to $0.7108 at the time of writing, down 0.10% for the session.

Elsewhere, the Japanese Yen was down 0.31% to ¥111.47 at the time of writing, with a pickup in market risk appetite weighing.

In the equity markets, it was a more positive start to the day, with the majors in positive territory at the time of writing. The Nikkei led the way early on, rising by 0.86%, while the ASX200 looked set to bring to an end to an 8-day losing streak that has left the index up just 1.26% year to date and down 2.81% for the month of September.

Following heavy losses on Monday, the CSI300 and Hang Seng also found support, following the NASDAQ and S&P500’s gains on Monday, the pair up 0.17% and by 0.20% respectively, though whether the Hang Seng can hold on through the day remains to be seen, with tech stocks continuing to get hit as trade war tensions linger.

The Day Ahead:

For the EUR, following a quiet start to the week, stats scheduled for release out of the Eurozone include 2nd quarter non-farm payroll numbers out of France, together with September economic sentiment figures for Germany and the Eurozone.

On the data front, the key driver with Germany’s sentiment figure, while the Oval Office and the anticipated effects of the ongoing trade war on the Eurozone economy will also be of influence ahead of Thursday’s ECB monetary policy decision and press conference.

At the time of writing, the EUR was down 0.06% to $1.1587.

For the Pound, it’s another big day on the data front, with key stats scheduled for release including August claimant count figures, together with July’s unemployment rate and wage growth.

While we will expect the numbers to provide some direction for the Pound, the stats skewed to the negative, Brexit chatter will continue to be the key driver, with comments from the EU’s chief negotiator Barnier of a possible deal within the next 8-weeks providing strong support at the start of the week.

At the time of writing, the Pound was up 0.02% to $1.3029, with today’s stats and Brexit chatter the drivers through the day.

Across the Pond, material economic data scheduled for release is limited to July’s JOLTs job openings that will likely have a relatively limited impact on the Dollar following last week’s labour market numbers. Other stats scheduled for release include Redbook and wholesale inventory numbers that could provide some direction.

Outside of the numbers, the Oval Office will continue to be a factor through the day, with a number of bill auctions later in the day also needing to be considered, any news of soft demand likely to pin the Dollar back.

At the time of writing, the Dollar Spot Index was up 0.12% to 95.266.

For the Loonie, with key stats scheduled for release limited to August housing starts, NAFTA will continue to be in focus through the day, a lack of progress to date having pinned the Loonie back at C$1.31 levels against the U.S Dollar.

At the time of writing, the Loonie was up 0.02% to C$1.3162 against the U.S Dollar.

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