Carney, Brexit and Draghi put the EUR and GBP in the Spotlight

The Pound shrugs off the Brexit deal, with a number of members of parliament calling for the deal to be rejected. Carney and Draghi could influence later.
Bob Mason

Earlier in the Day:

Economic data released through the Asian session this morning included 3rd quarter retail sales figures out of New Zealand and flash November manufacturing numbers out of Japan.

For the Kiwi Dollar, quarter-on-quarter retail sales stagnated in the 3rd quarter, falling well short of a forecasted 1% rise, following a 1.1% rise in the 2nd quarter. Core retail sales rose by just 0.4%, following a revised 1.3% rise in the 2nd quarter, which fell short of a forecasted 1.5% rise.

According to the figures, released by NZ Stats:

  • Department stores had the largest increase in the quarter, surging by 7.4% quarter-on-quarter, though much of the rise was attributed to a change in reporting format.
  • Across the 15 retail industries, 8 saw an increase in sales by volume, with 5 seeing a decline, the largest sector in decline being food & beverage services, quarter-on-quarter.
  • Excluding department store sales, which came in ahead of the pack due to the change in reporting methods, electrical and electronic goods retailing saw the largest volume increase in sales over the quarter.
  • By value of total retail sales, the jump in fuel prices and the introduction of the Auckland regional fuel tax saw retail fuel sales surge by 7%, quarter-on-quarter, which was offset by falling sales in the F&B and vehicle industries in the quarter.
  • By value of sales, 9 of the 15 industries had higher sales. Of the 6 industries in decline, the F&B sector saw sales fall by 2.5%, with motor-vehicle and parts retailing down 1.7%

At the time of writing, the Kiwi Dollar was up 0.10% to $0.6788, recovering from losses earlier in the session.

For the Japanese Yen, the November flash manufacturing PMI came in at a 2-year low 51.8, which was weaker than a forecasted 53 and October’s 52.9.

  • Output increased at a slower pace in November, with new orders falling as manufacturers saw weaker demand for the first time since September 2016.
  • New export orders increased at a slower pace than in October, with business confidence falling for a 6th consecutive month.
  • On the inflation front, both input and output prices increased at a slower rate, while employment increased at a faster pace.

The Japanese Yen moved from ¥112.918 to ¥112.926 against the U.S Dollar, upon release of the figures, before sliding to ¥113.22 at the time of writing, a loss of 0.23% for the session.

Elsewhere, the Aussie Dollar was up 0.19% to $0.7247, supported by improved risk sentiment through the session.

In the equity markets, the Hang Seng led the way, up by 1.66% at the time of writing, with the Nikkei and CSI300 rising by 0.68% and by 0.48% at the time of writing. Bucking the trend was the ASX200, which was down 0.77%, with mining and metal stocks seeing the heaviest losses, BHP Billiton sliding by 3.44% with concerns over the outlook for demand weighing.

The Day Ahead:

For the EUR, economic data is limited to October Ifo business climate figures out of Germany that will have an influence on the EUR, economic indicators out of Germany continuing to reflect weaker growth off the back of the 3rd quarter contraction in the economy.

Following the EU Summit, while member states signed off on the final hour Brexit deal that now needs to be ratified by Parliament as early as next week, Italy continues to stand firm on its 2019 budget plans. There’s yet to be talk of a compromise that could ultimately lead to a coalition implosion, with the EU’s decision on what disciplinary action to take of greater influence near-term.

On the monetary policy front, ECB President Draghi is scheduled to speak this afternoon, with ECB members Praet, Coeure and Nowotny also on the docket, with Draghi of greater influence, any dovish chatter a negative for the EUR.

At the time of writing, the EUR was up 0.01% to $1.1338, with today’s stats out of Germany and Draghi the key drivers through the day.

For the Pound, there are no material stats scheduled for release, leaving the Pound in the hands of Brexit chatter. On Sunday, Theresa May managed to seal a deal for Britain to leave the EU, though the near-term concern is that it won’t pass through Parliament, with the opposition Labour Party and a number of Conservative Party members having already stated that they would reject the deal.

Any deal is better than no deal for the markets and in the event of a rejection, things could get messy for the British PM and the Pound, which has brushed off news of the deal being signed off on Sunday by the EU.

On the monetary policy front, BoE governor Carney is scheduled to speak late in the day, with the Brexit deal and the economic outlook possible topics of discussion.

At the time of writing, the Pound was down 0.01% at $1.2813, with Brexit news and Carney the key drivers through the day.

Across the Pond, there are no material stats scheduled for release out of the U.S, leaving market sentiment towards this week’s G20 and noise from the Oval Office to provide direction through the day.

At the time of writing, the Dollar Spot Index was up 0.04% to 96.955, with sentiment ahead of this week’s FED meeting minutes also to influence.

For the Loonie, it’s a quiet day ahead, leaving the Loonie in the hands of market risk appetite and direction in crude oil prices, which have been on the bounce early on this morning to provide much needed support.

The Loonie was up 0.15% to C$1.3218 against the U.S Dollar at the time of writing.

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