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It’s Risk-On! Trade News and Exit Polls Drive the Pound and the Majors

The U.S announce an in-principal trade agreement with China and exit polls point to a Tory Party majority victory. It’s risk-on…
Bob Mason
Parliament

Earlier in the Day:

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

Key stats included business PMI numbers out of New Zealand ahead of the 4th quarter Tankan index and finalized November industrial production figures out of Japan.

On the geopolitical front, news of the U.S reaching an in-principal deal with China as part of a phase 1 trade agreement drove demand for riskier assets. The news ultimately overshadowed the stats.

From the UK, a key exit poll showed the Tories heading for an 86 seat majority, adding to the material easing in geopolitical risk in the early hours.

For the Kiwi Dollar

The Business PMI fell from 52.6 to 51.4 in November.

The Kiwi Dollar moved from $0.65992 to $0.65971 upon release of the figures, which came out ahead of the announcement on an in-principal trade agreement. At the time of writing, the Kiwi Dollar up by 0.36% to $0.6621.

For the Japanese Yen

While the Tankan figures may well reflect the impact of the U.S – China trade war on trade terms within the region, the latest news from the U.S should limit any fallout from the numbers.

Economists have forecast a 6% rise in the All Big Industry CAPEX in the 4th quarter, following on from a 6.6% rise in the 3rd quarter.

The Big Manufacturing Outlook Index is forecasted to rise from 2 to 3 in the 4th quarter, while the Large Manufacturers Index is forecast to fall from 5 to 2.

Economists have forecasted a fall from 21 to 16 for the Large Non-Manufacturers Index.

Finalized industrial production figures are forecasted to be in line with prelim…

At the time of writing, the Japanese Yen was down by 0.19% to ¥109.52 against the U.S Dollar, with the demand for safe havens sliding early on.

Elsewhere

The Aussie Dollar up by 0.39% to $0.6936, early support coming from the positive news from the U.S administration on trade.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Finalized November inflation figures are due out of Spain later this morning.

We would expect the stats to have a muted impact on the EUR, however, as the markets respond to the outcome of the UK General Election.

News of the in-principal trade agreement between the U.S and China was EUR positive early on. News from the UK exit polls also provided the EUR with support, with an orderly Brexit favored by the markets.

At the time of writing, the EUR was up by 0.49% to $1.1184.

For the Pound

The Pound will be in the hands of UK politics throughout the day…

A key exit poll in the early hours predicted a comfortable Conservative Party majority, driving the Pound to an early high $1.35149 before easing back.

The markets will now wait for the results. If the exit poll is correct, expect the Pound to make further gains…

At the time of writing, the Pound was up by 2.30% to $1.3464.

Across the Pond

It’s a busy day on the data front. Key stats include November retail sales and October business inventory numbers.

Expect the retail sales numbers to have the greatest influence on the day.

November import and export price index figures for November will likely have a muted impact on the Greenback.

While the stats will influence, the latest news on trade will ultimately be the key driver.

At the time of writing, the Dollar Spot Index was down 0.51% at 96.632.

For the Loonie

It’s yet another quiet day on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction.

Risk-on sentiment should provide support to crude oil prices and the Loonie on the day.

The Loonie was up by 0.10% to C$1.3172, against the U.S Dollar, at the time of writing.

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