Trade War Rhetoric and Brexit Chatter to Keep the USD and GBP in Action

Earlier in the Day:

Economic data released through the Asian session this morning was limited to October trade figures out of New Zealand.

For the Kiwi Dollar, there was more bad news following some particularly disappointing 3^rd quarter retail sales figures released on Monday, with the trade deficit widening in October, year-on-year, from NZ$5,330m to NZ$5,790m, which is the highest annual trade deficit since October 2007.

According to NZ Stats:

• Monthly imports hit a record NZ$6.2bn in October, rising above September’s previous record high NZ$5.9bn, the continued rise attributed to higher prices for crude oil and a pullback in the Kiwi Dollar.
• Import values for October were NZ$758 (14%) higher than in October 2017, with the rise spread across a range of commodities, through petroleum and producers were the main contributor, up NZ$257m (68%).
• On the export front, total exports rose by NZ$303m (6.6%) in October to NZ$4.9bn compared with October 2017, with exports sitting at their highest level for any October month.
• The increase in exports was attributed to fruit exports (NZ$204m) and kiwifruit exports in particular (NZ$112m).
• The monthly trade deficit narrowed from NZ$1.596m to NZ$1.205m, which was worse than a forecasted narrowing to an NZ$850m deficit.

At the time of writing, the Kiwi Dollar moved from $0.67734 to $0.67694 upon release of the figures before falling to $0.67761, marking a 0.13% loss for the session.

Elsewhere, the Japanese Yen stood at ¥113.43 against the U.S Dollar, a gain of 0.13% for the session, while the Aussie Dollar was down 0.03% to $0.7219, talk of Trump going ahead with the January 1^st, 2019 tariffs a negative start to the day to weigh on risk appetite.

In the equity markets, the Hang Seng saw red early on, down 0.49%, while the rest of the majors held onto early gains, the Nikkei and CSI300 both up by 0.09%, while the ASX200 gained 0.36%, partially reversing Monday’s slide, with the gains in the U.S and Europe providing little support ahead of the G20, as Trump lay’s down the foundations to trade talks with more tariff chatter at the start of the week.

The Day Ahead:

For the EUR, economic data is limited to jobseeker numbers out of France that are unlikely to have a material impact on the EUR through the day, with focus likely to remain on Italy and general sentiment towards the economic outlook, which could cause the ECB to pause on its monetary policy plans for next year should conditions deteriorate further.

At the time of writing, the EUR was up 0.03% to $1.1331, with geo-political risk and chatter on Italy the key drivers through the day.

For the Pound, it’s another quiet day on the data front, leaving the markets to continue to focus on Theresa May and her progress on home soil to convince MPs to shift on their current stance on the deal to drive through the Brexit deal in the announced 11^th December parliamentary vote, the current vote count going heavily against Theresa May’s widely criticised deal.

At the time of writing, the Pound was down 0.14% at $1.2809, with Brexit news the key driver through the day.

Across the Pond, economic data released through the day includes September housing sector figures and November’s consumer confidence numbers.

While focus will likely remain on the consumer confidence numbers, which comes in the wake of the mid-term elections and a choppy period in the U.S equity markets, we will also expect some Dollar sensitivity to housing sector numbers, weaker house price growth likely to weigh on the Dollar.

On the policy front, FOMC members Bostic and George are scheduled to speak late in the day that could also influence, any continued rise in dovish FOMC members certainly not supportive of a bullish Dollar.

At the time of writing, the Dollar Spot Index was down 0.01% to 97.06, with today’s stats and any trade war chatter ahead of Friday and Saturday’s G20 Summit likely to be the key drivers through the day.

For the Loonie, another quiet day ahead, leaves the Loonie in the hands of market risk appetite and direction in crude oil prices in particular.

The Loonie was down 0.04% to C$1.3260 against the U.S Dollar at the time of writing.