Economic Data Puts the Pound and the Dollar in the Spotlight

Earlier in the Day:

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

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

For the Kiwi Dollar

Business and consumer confidence figures were in focus in the early hours.

The Westpac Consumer Sentiment Index rose from 103.1 to 109.9 in the 4^th quarter.

According to the latest Westpac report,

• The Present Conditions Index increased from 106.4 to 110.1, with the Expected Conditions Index rising from 101.0 to 109.8.
• On the economic outlook front, the 1-year economic outlook sub-index rose from -9.2 to 4.2, with the 5-year economic outlook sub-index rising from -1.1 to 9.7.
• The Current Financial Situation sub-index rose from -2.4 to -0.9, with the Expected Financial Situation sub-index rising from 13.2 to 15.5.

The Kiwi Dollar moved from $0.65984 to $0.65967 upon release of the figures that preceded business confidence figures.

The ANZ Business Confidence Index rose from -26.4 to -13.2 in December, which was better than a forecasted rise to -13.6

According to the latest ANZ Report,

• A net 17% of firms expect stronger activity ahead, rising by 4 points.
• Sentiment amongst manufacturers saw a marked improvement, with service sector firms also upbeat. In contrast, the construction sector remained least optimistic, whilst sentiment improves.
• Improved sentiment towards the domestic economy, the level of spare capacity, and skilled labor shortages led to a lift in investment plans.
• Investment Intentions rose by 3 points to +9%, supported by the manufacturing sector (up 11 points to +22%).
• Employment intentions rose by 5 points to a net 8% of firms intending to lift employment, supported by the services sector.
• Profit expectations rose by 3 points to a net 2% expecting lower profitability, while export intentions rose by 6 points to +7%.
• Availability of credit fell by 12 points to a net 43% of firms expecting credit to be harder to get. This was the lowest level since records began in June 2009.

The Kiwi Dollar moved from $0.65905 to $0.65948 upon release of the figures. At the time of writing, the Kiwi Dollar down by 0.02% to $0.6596.

For the Aussie Dollar

According to the ABS, home loans rose by 0.6% in October, month-on-month, following a 1.4% rise in September. Economists had forecast a rise of 1.1%.

Alongside the release of the numbers, the RBA also released its minutes from the 3^rd December monetary policy decision.

Salient points from the minutes included:

• Growth in household disposable income had been weak over recent years, with members noting the importance of income growth as a key driver of consumption growth.
• The recent recovery in the established housing market was expected to be positive for consumption growth in the period ahead, however.
• Households’ expectations about future economic conditions had declined significantly since June.
• By contrast, households’ assessment of their own financial situation relative to a year earlier had remained steady and above average. Members noted that, historically, this gauge was of greater influence on household consumption decisions than expectations about future economic conditions.
• Conditions in established housing markets continued to strengthen, while the new housing construction market remained subdued.
• Business investment appeared to have eased in the September quarter.
• Conditions in the labor market had changed little since earlier in the year. Following a sustained period of stronger-than-expected employment growth, employment had been on the decline recently.
• Members noted that there had been little change in the economic outlook since the previous meeting.
• The outlook for growth in output continued to be supported by lower interest rates, tax cuts, high levels of spending on infrastructure, a pick-up in the housing market, and an improved outlook in the resources sector.
• Members did note, however, that weak growth in household income continued to present a downside risk to consumer spending.
• While largely unchanged from earlier in the year, members will monitor labor market conditions more closely.
• Members noted that it would be important to reassess the economic outlook in Feb-2020, with the Bank able to provide further stimulus, if required.

The Aussie Dollar moved from $0.68762 to $0.68758 upon release of the stats and minutes. At the time of writing, the Aussie Dollar was down by 0.28% to $0.6866 with the dovish minutes weighing early on.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.02% to ¥109.53 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Key stats are limited to October trade figures for the Eurozone.

Following impressive numbers out of Germany last week, any material narrowing would impact the EUR. Any downside would likely be limited, however, as sentiment towards trade improves following the U.S – China phase 1 agreement.

At the time of writing, the EUR was down by 0.01% to $1.1143.

For the Pound

It’s a busy day ahead on the economic calendar. Key stats include October wage growth and unemployment figures along with November’s claimant count numbers.

Expect the claimant count and wage growth figures to have the greatest impact on the Pound.

Following more disappointing private sector PMI numbers on Monday, pressure on the Pound will build should today’s figures raise more red flags…

On the political front, Brexit is back in focus. With Johnson planning a 1-year transition, there are doubts over whether there is enough time to negotiate a trade agreement. The EU has certainly raised doubts and if Brexit negotiations are anything to go by, Britain could end up with punitive EU tariffs.

It does make sense, however, for Johnson to prevent a neverending period of negotiation. Britain is also a key trading partner with the EU… It’s a 2-way street on this one.

At the time of writing, the Pound was down by 0.38% to $1.3281, the early slide coming off the back of concerns over Brexit.

Across the Pond

It’s a relatively busy day on the data front. Key stats include November industrial production and housing data, along with October’s JOLTs job openings.

Expect industrial production figures to have the greatest impact on the data front.

At the time of writing, the Dollar Spot Index was up 0.11% at 97.126.

For the Loonie

It’s a quiet day on the economic calendar. Economic data is limited to October manufacturing sales figures that will provide direction later today.

Outside of the stats, expect influence from crude oil prices on the day.

The Loonie was down by 0.12% to C$1.3171 against the U.S Dollar, at the time of writing.