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Euro Exchange Rate Fluctuates Amid Poor Eurozone Inflation Readings

UK Car Sales Drop for 9th Consecutive Month – Sterling (GBP) Exchange Rates Flat

The Pound meandered within a relatively narrow band against the majors on Friday morning, mostly limited by a run of mixed ecostats.

New car registrations in the UK fell -14.4% year-on-year in December – the ninth consecutive month of decline.

Sales to private motorists fell -6.5% in 2017 alone, whilst fleet sales similarly dropped -4.4% and business sales contracted -7.7%.

In slightly better news, UK labour productivity, measured by output per hour, increased 0.9% quarter-on-quarter in the three months to September, recovering from the previous period’s 0.1% drop.

This marked the first gain in UK productivity in three quarters, and the highest since Q2 2011 – leading many analysts to ponder if it is a sign that the UK’s long-lasting productivity issue is beginning to resolve.

Alas, this was not enough to fully drag the Pound out of its malaise.

GBP EUR Exchange Rate Fluctuates Amid Poor Eurozone Inflation Readings

The Pound Euro (GBP EUR) exchange rate fluctuated on Friday morning, limited by poor UK car sales but bolstered by news that inflation in the Eurozone continues to remain below the European Central Bank’s (ECB) target levels.

Official figures from Eurostat revealed that inflation across the Eurozone dipped modestly in December, with the headline year-on-year inflation rate falling from 1.5% to 1.4% in December – consistent with forecasts.

The year-on-year core inflation rate similarly disappointed, remaining stagnant at 0.9%.

This could prove of greater concern to policymakers, with the ECB traditionally going by the core figure when deciding its monetary policy outlook.

GBP USD Exchange Rate Slides Ahead of US Wage Data

Sterling (GBP) pared some of its recent gains against the US Dollar (USD) on Friday morning with the US Dollar capitalising on the current weakness of its Euro (EUR) counterpart.

Markets are currently awaiting the release of the US nonfarm payroll report which is forecast to show the addition of 190k new jobs in December, with the unemployment rate expected to remain unchanged at 4.1%.

Such an eventuality could put the GBP USD exchange rate under significant pressure.

On the wage front, markets are expecting modest growth, though deviations above or below forecast could also have huge consequences for the GBP USD exchange rate.

GBP CAD Exchange Rate Crawls Ahead Before Canadian Employment Figures

The Pound extended its lead against the Canadian Dollar (CAD) on Friday morning, with markets expecting the imminent Canadian unemployment release to reveal a rise from 5.9% to 6.0%.

In other news, crude oil prices continue to look bullish, with ongoing Iranian unrest helping sustain prices around the recent highs.

The outlook for GBP CAD today will likely be heavily dependent on the performance of the imminent Canadian ecostats.

GBP AUD Exchange Rate Climbs on Disappointing Aussie Trade Balance

The Pound Australian Dollar (GBP AUD) exchange rate inched ahead on Friday morning, bolstered by news that Australia’s trade deficit widened to AUD -0.63 billion in November, wider than the previous period’s AUD -0.30 billion, and far below the surplus that was forecast of AUD 1.1 billion.

The Australian Bureau of Statistics (ABS) reported that a sharp drop in non-monetary gold exports, coal, coke and briquettes was primarily responsible, completely offsetting the rise in exports of non-rural goods, rural goods and services.

The fall in coal perhaps reflecting the ongoing efforts of Chinese authorities in limiting air pollution in Northern provinces.

GBP NZD Exchange Rate Continues Slide on Dairy Price Rise and Upbeat Chinese PMI Figures

The Pound New Zealand Dollar’s (GBP NZD) fall continued into Friday morning, with NZD supported by the recent surge in global dairy prices and the upbeat Chinese PMI readings.

Looking ahead, attention will soon turn to the Reserve Bank of New Zealand’s (RBNZ) monetary policy outlook for 2018-19, with the markets now surprisingly leaning towards the possibility of a rate hike in 2018.

New Zealand’s overnight index swaps indicate a 72% chance for a quarter-point rate increase by the end of this year – an expectation that comes in direct contrast to the outlook of the RBNZ and many analysts, who continue to point to New Zealand’s soft consumer prices and poor wage growth.

Beyond this, the New Zealand government and uncertainty regarding the effects of their new policies will likely continue to be a concern in 2018, with the regime’s decision to cancel tax cuts scheduled in 2018, for example, already justifying some investor anxiety.

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