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Britain Explores Possible TPP Membership, Pound (GBP) Exchange Rates Fluctuate


Britain to Join the Trans-Pacific Partnership? Pound Sterling (GBP) Exchange Rates Climb

The Pound (GBP) rose in value on Wednesday morning, bolstered by yesterday’s above-forecast manufacturing PMI and today’s news that the British government is seeking to join the Trans-Pacific Partnership (TPP) trade group after Brexit.

It is reported that the UK’s Secretary of State for International Trade, Liam Fox, and his department are working on proposals to join the group, with the TPP currently in a state of flux after the United States pulled out.

Such a partnership could potentially boost exports after the UK leaves the European Union, making the UK the first member of the agreement that does not have borders on the South China Sea or the Pacific Ocean.

However, any potential support to the Pound was undermined as the UK’s December construction PMI dropped to 52.20, down from a score of 53.10 in November and below the forecast of 53.4. This resulted predominantly from weaker growth in house building as well as a fall in commercial building, though its negative effects seemed mostly negated by news of plans to join the TPP.

Pound Euro (GBP/EUR) Exchange Rate Rallies Despite German Job Market Hitting a New 2017 High

The Pound Euro (GBP EUR) exchange rate rallied on Wednesday on news that the UK is exploring options of joining the TPP.

This was despite a run of positive employment figures from Germany.

According to figures published by the statistics office Destatis, the seasonally adjusted jobless total fell by 29,000 to 2.44m, smashing forecasts of a 12,000 decrease and effectively putting the unemployment rate at 5.5%.

This marked 638,000 new jobs in 2017, putting employment in the bloc’s largest economy at its highest level since Germany’s reunification in 1990.

Destatis commented:

‘Rising labour market participation and an influx of foreign workers balanced out a negative demographic impact on employment’.

Pound US Dollar (GBP/USD) Exchange Rate Stumbles as US Dollar Perks Up

The US Dollar (USD) rallied from recent lows on Wednesday, perked up by the current weakness of its Euro (EUR) counterpart.

Its lead over the Pound remained fairly limited, however, with the US Dollar’s upward potential stymied by inflation woes and the effect soft consumer prices could have on 2018’s monetary policy outlook.

Domestic data from the US due for imminent release today includes the US mortgage application figures, US construction spending, ISM readings for manufacturing, prices paid, new orders, employment and finally; the FOMC meeting minutes from December.

Markets will be particularly interested in the content of the minutes as they could shed fresh light on the 2018 outlook – though it is already known that the bank is somewhat worried about the pace of core consumer price growth.

Pound Canadian Dollar (GBP/CAD) Exchange Rate Steady Despite Canadian Manufacturing Growth

Despite recently benefitting from soaring oil prices, the Canadian Dollar (CAD) failed to capitalise against Pound Sterling on Wednesday, weakened by the US Dollar’s fresh climb and unable to fully benefit from some recent positive ecostats.

Manufacturing in Canada was revealed to have risen in December, with Canada’s latest PMI survey presenting a rise to 54.7, up from the previous 54.4 and above the forecast of a drop to 54.2.

This pointed to the strongest growth in business conditions since September, with new orders growing at a faster pace and employment still on the up (for the 15th consecutive month now).

Markets will be waiting for Friday for Canada’s run of employment readings, but in the meantime investors will be looking to the imminent US data releases, with poor readings liable to send the Canadian Dollar higher and positive readings liable to kick GBP CAD back into the Pound’s favour.

Pound Australian Dollar (GBP/AUD) Exchange Rate Loses Ground on RBA Rate Hike Expectation

The Pound Australian Dollar (GBP AUD) exchange rate continued to lose ground on Wednesday, this time on hawkish predictions from HSBC.

In the latest Asian Economics report, HSBC Australia asserted that that continued economic growth and improvements within the mining sector should see the Reserve Bank of Australia (RBA) move for a rate hike mid-2018.

The report read:

‘The main force at work has been that mining investment is stabilising, after having fallen significant in recent years. At the same time, growth in the non-mining sectors has remained solid’.

It should also be noted, however, that the report prognosticated that the cooling housing market could be a larger drag on growth that expected – particularly if Chinese household demand pulls back as forecast.

Nonetheless, this report effectively positions the RBA as the more hawkish option – compared to the Bank of England (BoE), with the UK’s central bank not expected to move for a rate hike until sometime in 2019.

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Tumbles as Global Dairy Prices Soar

The Pound New Zealand Dollar (GBP NZD) exchange rate tumbled on Wednesday as markets reacted to news that global dairy prices rose 2.2% at the latest auction, smashing the previous period’s -3.9% fall and marking the sharpest rise since May.

The New Zealand Dollar (NZD) quickly soared in demand in reaction to the news.

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