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Brexit, Retail Sales and the BoE Keep the Pound in Focus

Economic data continues to disappoint as Johnson looks to expedite Brexit. How will the BoE interpret recent stats? It’s hard to be hawkish right now…
Bob Mason
BoE

Earlier in the Day:

It was a particularly busy day on the Asian economic calendar in the earlier hours of this morning.

The Kiwi Dollar, Japanese Yen, and the Aussie Dollar were in action in the early part of the day.

For the Kiwi Dollar

3rd quarter GDP numbers were due out along with November trade figures.

In the 3rd quarter, the New Zealand economy grew by 0.70%, quarter-on-quarter, coming in ahead of a forecast of 0.6%. In the 2nd quarter, the economy had grown by just 0.1%.

According to NZ Stats,

  • A jump in retail spending provided support in the 3rd quarter, which grew by 2.4%, driven by a jump in spending on electronics.
  • Services industries, which account for approx. two-thirds of the economy, grew by 0.4%, following a 0.8% rise in the 2nd

In November, the trade deficit narrowed from NZ$5,070m to NZ$4,820m, year-on-year. Quarter-on-quarter, the deficit narrowed from NZ$1,039m to NZ$753m.

According to NZ Stats,

  • Month-on-month, goods exports increased by 7.6% to NZ$5.2bn, while goods imports rose by 2.0% to NZ$6.0bn.
  • The exports of milk powder, butter and cheese surged by 24% to NZ$1.8bn driving exports in November.
  • Exports to China surged by 36% to NZ$1.9bn, the highest on record.
  • On the imports front, the import of motor vehicles jumped by 30% to NZ$434m, with the imports of mechanical machinery and equipment rising by 13%.

The Kiwi Dollar moved from $0.65784 to $0.65885 upon release of the figures. At the time of writing, the Kiwi Dollar up by 0.02% to $0.6590.

For the Aussie Dollar

November employment numbers impressed.

According to the ABS,

  • Employment increased by 39.9K in November, reversing a 19k slide in October. Economists had forecast a rise of 14k.
  • Full employment increased by 4.2k, partially reversing a 10.3k slide from the previous month.
  • The unemployment rate fell from 5.3% to 5.2%, while the participation rate held steady at 66.0%.

The Aussie Dollar moved from $0.68592 to $0.68684 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.28% to $0.6872, supported by the positive employment figures.

For the Japanese Yen

The Bank of Japan held rates unchanged at -0.1% this morning. This was in line with market expectations, leaving the BoJ press conference later this morning as the main event.

The Japanese Yen moved ¥109.572 to ¥109.586 upon release of the decision. At the time of writing, the Japanese Yen was down by 0.04% to ¥109.59 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone to provide direction.

A lack of stats will leave the EUR exposed to geopolitics on the day. The threat of a no-deal Brexit event would be considered EUR negative. We saw resilience in the EUR on Tuesday, which may continue as Trump faces impeachment.

At the time of writing, the EUR was up by 0.12% to $1.1127.

For the Pound

It’s a big day ahead on the economic calendar. Key stats include November retail sales figures.

While the figures will provide direction, the BoE monetary policy decision is the main event of the day.

BoE Governor Carney and the team have plenty to consider following Johnson’s General Election victory last week.

Economic data this week has failed to impress, raising the prospects of a near-term rate cut. We could see more dissent and suggestions of imminent support, which would add further downside on the Pound.

Particularly attention will likely be paid on the vote counts and the monetary policy meeting minutes…

Outside of the numbers, chatter on Brexit will continue to influence.

At the time of writing, the Pound was up by 0.05% to $1.3084.

Across the Pond

It’s a busy day on the data front. December’s Philly FED Manufacturing Index figures, existing home sales and the weekly jobless claims will provide direction.

On the geopolitical front, there’s also Trump’s impeachment and Brexit to factor in…

At the time of writing, the Dollar Spot Index was down 0.05% at 97.374.

For the Loonie

It’s a quieter day on the economic calendar. Economic data is limited to October wholesale sales, which will provide direction later in the day.

The markets will also be looking out for the U.S Congress vote on the USMCA, which would be Loonie positive, assuming the vote is favorable.

The Loonie was down by 0.02% to C$1.3117 against the U.S Dollar, at the time of writing.

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