Pound Sterling (GBP) Exchange Rates Continue Slide on Widening Trade Deficit and Gloomy Brexit Employment Outlook
The Pound extended its slide against the majors on Thursday morning as markets digested a recent prognostication that the UK could lose half a million jobs and near £50bn in investment by 2030.
The analysis, created by the Cambridge Econometrics, asserted that a no-deal Brexit could have severe implications on jobs and growth, claiming that ‘the harder the Brexit, the more severe the economic damage could be.’
The important word here is ‘could’, of course, with analysts stressing that the figures are indicative and likely to be heavily influenced by a number of factors.
The market reaction to the news was a small drop in demand for the Pound.
In other news, Bank of England (BoE) Deputy Governor Ben Broadbent was quizzed regarding monetary policy in a BBC radio interview, asserting that he did not know if the bank would raise interest rates in 2018.
Broadbent did, however, echo previous comments that the forecasts show rate rises are likely over the 2018-2020 period.
Notably, he also used the opportunity to point towards a disappointing rate of growth in consumer borrowing, stating:
‘Yes it’s been growing, but it is still materially lower than it was 10 years ago.’
Broadbent’s remarks were ultimately restrained, leaving investors with little to go on and having only a minimal effect on the Pound.
German GDP Misses its Mark, Pound Euro (GBP EUR) Exchange Rate Remains Limp
The Pound Euro (GBP EUR) exchange rate remained mostly flat on Thursday amidst a run of mixed ecostats from the bloc.
German full-year GDP growth in 2017 printed at 2.2%, up from the previous period’s 1.9% but notably below the forecast of a 2.5% rise.
Whilst this did mark the strongest pace of expansion since 2011 – bolstered by household consumption, fixed investment and construction – the fact that it missed the market forecast limited its potential in bolstering the Euro.
Pound US Dollar (GBP USD) Exchange Rate Drops as China Denies Talks that they are Halting the Purchase of US Bonds
The Pound pared recent gains against the US Dollar (GBP USD) on Thursday morning, largely limited by fresh comments from China’s foreign exchange regulator.
The regulator asserted that recent reports that China intends on slowing down or halting its purchase of US Treasury bonds are based on erroneous information and are therefore false.
This see-sawing renewed demand for the US Dollar once again.
Looking forward, the GBP USD exchange rate could come under pressure this afternoon when the US releases its producer price index (PPI) numbers, with analysts expecting price growth to have accelerated from 0.2% to 0.4% in December.
GBP CAD Exchange Rate Weak on Soaring Oil Prices and BoC Rate Hike Hopes
The Pound continued its slide against the Canadian Dollar on Thursday morning with crude oil prices surging and rate hike hopes from the Bank of Canada (BoC) continuing to propel the ‘Loonie’.
Next week the Bank’s governor, Stephen Poloz, is expected to announce a rate hike, with economists expecting such a hawkish move on the back of recent positive economic data.
Canadian Imperial Bank of Commerce (CIBC) Chief Economist Avery Shenfeld shared a similar perspective, stating:
‘The results are in, and they are more than good enough. Overall, enough in here on the plus side to cement the case for a rate hike later this month.’
If this does indeed occur then the Pound Canadian Dollar (GBP CAD) exchange rate will likely tumble.
Australian Retail Sales Smash Expectations, GBP AUD Exchange Rate Falls
The Pound fell even further against the Australian Dollar (GBP AUD) in the early hours of Thursday as investors responded to news that retail trade in Australia smashed expectations.
Retail trade increased to 1.2% month-on-month in November, up from the previous period’s rise of 0.5% and the market estimates of a 0.4% gain.
This marked the fastest rise in sales since February 2014, with an acceleration in the purchase of household goods, clothing, footwear and accessories.
Ultimately this bodes well for the Australian economy moving into 2018, giving investors even more reason to believe that the Reserve Bank of Australia (RBA) might be on track to raise interest rates sooner than anticipated in 2018.
GBP NZD Exchange Rate Prolongs Fall on 2018 ‘Kiwi’ Optimism
The Pound New Zealand Dollar exchange rate continued to fare poorly on Thursday with the New Zealand Dollar bolstered by optimistic predictions for 2018.
MUFG, the global investment banking giant, expects 2018 to be a strong year for the New Zealand Dollar, with the currency recovering from volatility and economic woes after the recent general election.
Derek Halpenny, European Head of Global Markets Research at MUFG stated:
‘The plunge in confidence looks overdone and is likely to recover while the favourable global backdrop should help provide support for corporate and household confidence.’
This outlook and the recent surge in global dairy prices continues to keep GBP NZD in the ‘Kiwi’ Dollar’s favour.