Daily Market Update

Sterling, Kiwi Drop; Euro Rises

October 19, 2017

The U.S. is slightly weaker against most of its counterparts, while rallying against the New Zealand dollar and British pound.

USD

The U.S. is slightly weaker against most of its counterparts, while rallying against the New Zealand dollar and British pound. The greenback is on the weaker side of things against the Euro at the time of writing, despite wild swings in the EUR/USD cross overnight. It appears that the Spanish government will suppress the autonomy of the Catalonia region after Catalonian President Puigdemont refused to drop his claim to independence.

Federal Chair Janet Yellen will interview for the job she already has today in Washington. The current front runner to replace her appears to be economist John Taylor. Taylor is seen to be more bullish than Yellen so his appointment could mean a boost for the U.S. dollar.

This morning’s economic docket did little to change the direction of the greenback. Jobless claims beat expectations and continuing claims are still near the best in 40 years. The Philadelphia Fed survey also impressed.

 

NZD

The New Zealand dollar dropped like a stone overnight falling against all of its major counterparts. The opposition Labour Party won the support of smaller parties to form a new government. The unexpected turn now calls into question the direction the central bank will take in the future. According to Bloomberg, investors are concerned the economy would slow under a Labour-led government that wants to boost social spending and have the Reserve Bank of New Zealand add full employment to its mandate of price stability. In addition, the Labour party and the New Zealand First party want to cut immigration from record levels which would risk exacerbating a skills shortage and keeping growth low.

 

GBP

The British pound came under renewed pressure in early trading on the back of more poor economic data. Retail sales for September dropped 0.8%, missing expectations for an already dour 0.1% contraction. August’s number was also downwardly revised making the third quarter the weakest quarter in four years.

Brexit negotiations will continue today as Theresa May will meet with EU leaders today. Headline risk is possible for the sterling but we already have low expectations for today’s progress.

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