Geopolitics Put the Dollar and the Pound in the Spotlight

Trump hits China with the HK Bill. After ignoring demands from Beijing to veto the Bill, will China retaliate or bide its time?
Bob Mason
U.S.-China Trade Dispute

Earlier in the Day:

It was a relatively busy day on the economic calendar through the Asian session this morning.

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

Retail sales figures out of Japan, business confidence figures from NZ and capital expenditure figures out of Australia provided direction early on in the day.

On the geopolitical front, while optimism over trade remained, news of Trump signing the HK Bill to protect protestor rights hit the wires in the early part of the day.

For the Japanese Yen

According to the Ministry of Economy, Trade, and Industry, retail sales slid by 7.1%, year-on-year, in October, partially reversing a 9.1% jump in September. Economists had forecast a fall of 3.8%.

The Japanese Yen moved from ¥109.333 to ¥109.413 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.13% to ¥109.40 against the U.S Dollar.

For the Kiwi Dollar

Business confidence improved in November, with the ANZ Business Confidence Index rising from -42.4 to a current year high -26.4. Economists had forecast a rise to -30.8.

According to the latest ANZ Report,

  • All activity indicators rose, with both headline business confidence and own activity seeing double-digit increases to current year highs.
  • Support came from the Agriculture and Retail sectors.

Looking at the numbers:

  • Profit expectations rose by 16 points to a net 5% expecting lower profitability.
  • Export intentions increased by 1 point to +1%.
  • Employment intentions increased by 12 points to a net 3% of firms intending to increase hiring.

The Kiwi Dollar moved from $0.64128 to $0.64266 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.06% to $0.6423, with support coming from the improved business confidence figures.

For the Aussie Dollar

Private new capital expenditure fell by 0.2% in the 3rd quarter, quarter-on-quarter, following on from a 0.6% decline in the 2nd quarter. Economists had forecast a 0.1% decline.

According to the ABS,

  • While expenditure on buildings and structures rose by 2.7%, expenditure on equipment, plant, and machinery fell by 3.5%…

The Aussie Dollar moved from $0.67721 to $0.67702 upon release of the figures. At the time of writing, the Aussie Dollar down by 0.15% to $0.6766.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Key stats include prelim November inflation figures out of Spain and Germany and Eurozone consumer confidence figures.

A pickup in inflationary pressure would provide some support for the EUR over the course of the day. Barring a major upswing, however, any moves in the EUR would likely be short-lived.

We would expect the Eurozone’s consumer confidence figures to have a greater influence, however.

The ECB continues to rely on consumer spending to support the broader economy. With consumer confidence in both Germany and France seeing an uptick, the figures should provide support to the EUR.

On the geopolitical front, any updates from Beijing and Washington on trade will also influence. Some further chatter in response to the HK Bill is to be expected.

At the time of writing, the EUR was up by 0.07% to $1.1007.

For the Pound

It’s yet another quiet day on the data front. Economic data is limited November house price figures that will have a muted impact on the Pound.

The focus will remain on UK politics. Later in the day, Sky News is scheduled to host a lived televised debate with Boris Johnson, Jeremy Corbyn, and Jo Swinson.

Corbyn has been on the front foot in the debates. Expect the Pound to respond to the opinion polls both before and after the debate…

At the time of writing, the Pound was up by 0.04% to $1.2926.

Across the Pond

It’s a quiet day on the economic calendar, with the U.S on holiday for Thanksgiving.

While the markets are closed and there are no stats, Trump delivered a Thanksgiving surprise to rattle the markets.

Signing the HK Bill despite Beijing’s demands to veto it will likely raise doubts over whether China will continue trade talks.

At the time of writing, the Dollar Spot Index was down 0.04% at 98.333.

For the Loonie

It’s a quiet day on the economic calendar, with stats limited to 3rd quarter current account figures…

A lack of material stats leaves the Loonie in the hands of market risk sentiment on the day.

The Loonie was down by 0.04% to C$1.3287, against the U.S Dollar, at the time of writing.

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