Taxes, Brexit and NAFTA to drive the USD, GBP and the Loonie

Earlier in the Day:

Key stats out through the Asian session were on the lighter side this morning, limited to November electronic card sales out of New Zealand and Japan’s 4^th quarter BSI Large Manufacturing Conditions index numbers.

There was finally some good news for the Kiwi Dollar, with electronic sales rising by 1.2% in November, with October’s sales revised up to 0.5. A 5% surge in fuel sales, equivalent to an N$28m rise, was the key contributor to November’s gain, with durables sales also impressing, up N$14m (1.2%) for the month.

The Kiwi Dollar moved from $0.0.68382 to $0.68388 upon release of the data, the lack of response by the Kiwi Dollar more to do with the time of the data release than the data itself. At the time of writing, the Kiwi Dollar was up 0.70% at $0.6895.

Japan’s BSI Large Manufacturing Conditions Index for the 4^th quarter was also positive, rising from 9.4 to 9.7, though the Yen was largely unresponsive to the figure, moving from ¥113.566 to ¥113.548 upon release of the data.

For the Aussie Dollar, it was a positive start to the week, up 0.20% to $0.7524 ahead of the European session, with the risk on sentiment providing support, in spite of a fall in crude oil prices through the session.

In the equity markets, the CSI300 was leading the way at the time of writing, up 0.86%, with the Hang Seng (+0.50%) and Nikkei (+0.42%) and the ASX200 (+0.07%) also in positive territory.

The lack of material stats and the anticipation of this week’s rate hike by the FED left volumes on the lower side. Nonfarm payroll and wage growth figures out of the U.S on Friday continued to support a December move, with the only possible road block between now and Wednesday’s decision being November inflation figures due out on Wednesday.

The Day Ahead:

With no material stats out of the Eurozone today, the markets will be left to consider what lies ahead for the week and political events that include Merkel’s progress on forming a coalition government with the SPDs and Brexit negotiations.

The latest news from Germany is of a call by the SDPs for a United States of Europe. The concept has been rejected by key members of the Chancellor’s CDU party and, with coalition talks scheduled for Wednesday, there could be more drama ahead.

At the time of writing, the EUR was up 0.05% at $1.1779, with any risk off sentiment likely to provide further upside for the EUR through the European session, though it’s looking risk on for the day.

For the Pound, it’s a quiet day on the data front, which will leave the markets focused on Brexit chatter through the day.

The news over the weekend was a positive one for the Pound, with the British PM expecting EU leaders to agree to begin the next phase of negotiations at Thursday’s EU Summit. There had been concerns of a failure to progress following the DUP’s moves last week, the final agreement being that there would be no hard border for Ireland.

At the time of writing, the Pound was up 0.04% at $1.3395, with direction hinged on the British Prime Minister’s progress on Ireland’s borders and any noise from Brussels.

Across the Pond, stat out of the U.S are limited to October’s JOLTs job openings, which are forecasted to be Dollar negative, though with the anticipated rate hike by the FED on Wednesday and progress on the tax reform bill, any downside for the Dollar is likely to be limited.

At the time of writing, the Dollar Spot Index was down 0.08% to 93.828, with noise from Capitol Hill needing to be considered through the day.

For the Loonie, things could get a little choppy later today as NAFTA talks resume. It’s been a tough time for the Canadian government and if there are more sticking points, we can expect the Loonie to feel the heat, with economic data out of Canada on the lighter side this week.

The U.S Dollar was down 0.02% to $1.2845 against the Loonie, with the pair likely to remain range bound ahead of any updates on NAFTA talks later today.