Brexit, U.S Inflation Figures and the Oval Office to Influence the GBP and USD

Earlier in the Day:

Economic data released through the Asian session was on the heavier side this morning, with key stats including November building consent figures out of New Zealand, November household spending and current account numbers out of Japan and November retail sales figures out of Australia.

For the Kiwi Dollar, building consents fell by 2% in November, month-on-month, reversing a downwardly revised 1.4% rise in October, according to figures released by NZ Stats.

• Year-on-year, new home consents were up 5.3%, with stand-alone houses accounting for almost two-thirds of new homes consented over the year.
• On the non-residential side, consents issued exceeded NZ$7bn for the first time on record in the year ended November 2018, while the value of offices and transport buildings consented for the year had the largest fall, down NZ$351m year-on-year.

The Kiwi Dollar moved from $0.67808 to $0.67799 upon release of the figures before rising to $0.6787 at the time of writing, a gain of 0.10% for the session.

For the Japanese Yen, household spending rose by 1.1% in November, month-on-month, to come in ahead of a forecasted 0.2% rise, while down from October’s 1.8% rise. Year-on-year, household spending fell by 0.6%, which was worse than a forecasted stall, following  October’s 0.3% decline.

• Spending fell on fuel, light & water charges (-10%); medical care (-5.2%); food (-2.2%); culture & recreation (-2.3%); furniture & household utensils (-1.8%); transportation & communication (-1.6%) and clothing & footwear (-0.9%), all contributing to the year-on-year fall in spending.
• Increased spending on housing (+18.6%) and education (+7.5%) offset some of the downside.

According to the figures released, household disposable income rose by 0.3%, with income rising by 0.1%, while the average propensity to consume slid by 1.7%.

Of less influence was Japan’s current account figures that were released later in the morning, with the current account surplus narrowing from ¥1.310tn to ¥0.757tn in November, coming in above a forecasted ¥0.568tn.

The Japanese Yen moved from ¥108.332 to ¥108.343 against the U.S Dollar, upon release of the household spending figures, before easing to ¥108.36 at the time of writing, a gains of 0.06% for the session.

For the Aussie Dollar, month-on-month retail sales rose by 0.4% in November, which came in ahead of a forecasted and October 0.3% increase. According to figures released by the ABS:

• Household goods retailing led the way, rising by 1.2%, with spending on clothing, footwear and personal accessories up by 1.5%, both set of numbers supported by promotional activity, including Black Friday.
• There were also increases in spending in food retailing (+0.2%) and department stores (+0.4%).
• Dragging on the headline number were falls in spending on other retailing (-0.1%) and cafes, restaurant and takeaway services retailing (-0.1%).

The Aussie Dollar moved from $0.71925 to $0.71965 upon release of the figures before easing back to $0.7192 at the time of writing, a gain of 0.1% for the session.

The Day Ahead:

For the EUR, it’s another quiet day on the data front, leaving the EUR in the hands of market risk sentiment and further reaction to the release of the FED and ECB monetary policy meeting minutes, the economic outlook for the Eurozone looking somewhat murkier than that of the U.S, suggesting a cap on the upside in spite of the pressure on the Dollar amidst the ongoing government shutdown.

At the time of writing, the EUR was up 0.10% to $1.1511, with market risk sentiment to provide direction through the day.

For the Pound, it’s a particularly busy day ahead. On the data front, key stats scheduled for release later this morning include November industrial and manufacturing production, trade figures and GDP numbers, which are released ahead of the NIESR Monthly GDP Tracker later in the day.

While focus will be on the manufacturing production and GDP numbers on the data front, direction through the day will ultimately be hinged on chatter from Parliament, as MPs edge closer to next week’s Brexit deal vote. With the British PM under ever increasing pressure, expectations are for the deal to be rejected and for Theresa May to have just 3-days to scamper back to Brussels in a bid to deliver a better deal.

Interestingly, the EU will lack any incentive to provide Theresa May with any lifeline, a failure to garner more favourable terms likely to raise the chances of a 2^nd referendum that could ultimately leave Britain within the EU.

At the time of writing, the Pound was up by 0.02% to $1.2750, with updates from parliament the key driver through the day.

Across the Pond, economic data is limited to December inflation figures out of the U.S that will provide some direction for the Dollar, forecasts being Dollar neutral.

Following a recent shift in forward guidance by the FED, the Dollar will likely be particularly sensitive to any weaker than forecasted numbers.

Outside of the stats, the ongoing government shutdown and general sentiment towards the U.S and global economic outlook will also provide direction.

At the time of writing, the Dollar Spot Index was down 0.10% to 95.444.

For the Loonie, there are no material stats scheduled for release, leaving the Loonie firmly in the hands of crude oil prices through the day.

The Loonie was up 0.03% to C$1.3232 against the U.S Dollar at the time of writing.