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The Pound Stays in the Spotlight, with the EU Needing to Sympathize

By:
Bob Mason
Updated: Jan 17, 2019, 08:21 UTC

With Theresa May and the Tories surviving the day, focus will shift to the EU and whether the British PM can find better terms.

The Pound Stays in the Spotlight, with the EU Needing to Sympathize

Earlier in the Day:

Economic data released through the Asian session this morning was on the lighter side, with key stats limited to November home loan figures out of Australia and December house price numbers out of the UK. Outside of the numbers, BoJ Governor Kuroda also spoke in the early part of the day.

For the Aussie Dollar, new home loans fell by 0.9% in November, month-on-month, which was better than a forecasted 1.5% slide following a 2.1% rise in October. According to the ABS, the decline in the number of dwelling commitments was attributed to

  • Construction dwellings fell by 2.0%, with the number of purchases of established dwellings falling by 1.1%.
  • Partially offsetting the numbers was a 3.4% rise in the number of new dwelling purchases.

The Aussie Dollar moved from $0.71688 to $0.71680 upon release of the figures, before easing to $0.7155 at the time of writing, down 0.18% for the session.

Out of the UK, the RICS House Price Balance fell from -11% to -19% in December, which was worse than a forecasted -13%.

While largely ignored through the Asian session, the direction of the housing sector is considered to be one of the UK’s economic indicators. The numbers are generated from a survey of surveyors who reported a faster rate of decline in house prices at the end of the year.

The Pound moved from $1.2883 to $1.28793 upon release of the figures, which were largely brushed aside following the late in the day victory for Theresa May and the coalition government.

For the Japanese Yen, BoJ Governor Kuroda gave no comments on either policy or the economy this morning, following a warning by Hayakawa in the early hours, the ex BoJ chief economist forecasting a recession as early as the 3rd quarter of this year and a Japanese Yen at sub-¥90 levels against the Dollar.

At the time of writing, the Japanese Yen stood at ¥109.05 against the Dollar, up 0.04% for the session.

The Day Ahead:

For the EUR, economic data scheduled for release is limited to finalized December inflation figures out of the Eurozone. Focus will be on the monthly figure, which is forecasted to be EUR neutral.

Barring deviation from forecasts, the EUR’s unlikely to find too much support from the numbers, which are falling well shy of the ECB’s target. Following some dovish commentary from the ECB President on Tuesday and a downward bias in the global equity markets, stats out of the U.S are going to need to disappoint for the EUR to close out the day in positive territory.

At the time of writing, the EUR was down 0.07% to $1.1384.

For the Pound, the coalition government and Theresa May survived a vote of no confidence, leaving focus now back on Brexit and whether the British PM can garner a more favourable Brexit deal in the coming days to pass through Parliament and give Britain a fighting chance on its way out of the EU.

With the Labour Party in a state of flux, hopes of a return to the front seat dashed for now, it will all boil down to whether a deal will pass through parliament or whether there’s a delay to the 29th March departure date that may possibly give the British people a second bite of the cherry.

At the time of writing, the Pound was down by 0.13% to $1.2868, with plenty of uncertainty over Britain’s future weighing early in the day.

Across the Pond, while economic data is on the lighter side, it may well pack a punch, with January’s Philly FED Manufacturing PMI numbers due out later today. Following December numbers that saw the Dollar lose ground, forecasts are for a partial recovery that will provide some support, though not enough to expect a shift in outlook towards monetary policy.

Barring a material rise in the weekly jobless claims figures, the PMI numbers and the Oval Office will be the area of focus later today.

On the policy front, FOMC member Quarles is scheduled to speak, who will unlikely have a material impact on the Dollar, the markets having already decided on the more dovish policy stance following commentary from FED Chair Powell and more prominent members of the Committee.

At the time of writing, the Dollar Spot Index was up 0.11% to 96.163.

For the Loonie, a lack of economic data continues to leave the Loonie in the hands of market sentiment towards the global economic outlook and crude oil prices.

We can expect some movement upon release of OPEC’s monthly report, which is due out this afternoon, with focus being OPEC’s forecasts for the year ahead and whether talk of a cut in production would be enough should forecasts point towards a slide in demand.

The Loonie was down 0.20% to C$1.3281 against the U.S Dollar at the time of writing.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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