Pound Drops on Surprise BoE Interest Rate Split

Export Growth Fuels Australian Dollar Gains

A surprise widening of the Australian trade surplus helped to lift the Australian Dollar higher across the board yesterday. As the surplus widened from 6.6 billion to 7.1 billion this encouraged a greater sense of confidence in the health of the Australian economy. With exports found to have picked up 3% on the month the negative impact of ongoing global trade tensions appeared to have eased, offering the antipodean currency a solid boost.

However, this bullishness could easily fade if the Reserve Bank of Australia’s (RBA) statement on monetary policy shows any signs of dovishness.

Surprise BoE Vote Split Drags Pound Lower

The mood towards the Pound soured significantly in the wake of the Bank of England’s (BoE) unexpectedly split interest rate decision. With two policymakers voting in favour of cutting interest rates back to 0.5% at the November meeting the odds of future rate cuts picked up sharply. GBP exchange rates also lost ground thanks to the BoE’s decision to downgrade its growth forecasts, highlighting the lingering impact of Brexit-based uncertainty.

As long as a sense of political anxiety continues to hang over the UK outlook the potential for a Pound rebound looks limited.

Euro Shrugs Off German Industrial Production Decline

EUR exchange rates largely shook off the impact of another disappointing month of German industrial production. Although signs continue to point towards weaker economic momentum within Germany this was ultimately overshadowed by the release of the European Central Bank’s (ECB) latest economic bulletin. The central bank indicated that it expects to see modest but positive growth in the second half of 2019, even though this is unlikely to alter its dovish policy outlook.

A widening of the German trade surplus may offer further encouragement to the single currency this afternoon.

US Dollar Benefits from Falling Jobless Claims

Lower jobless claims figures helped to limit the downside potential of the US Dollar last night, suggesting a level of steadiness within the US labour market. However, the safe-haven currency failed to capitalise on growing market anxiety over the prospect of an imminent US-China trade deal. With investors maintaining a generally risk-positive outlook USD exchange rates struggled to find any particular traction.

An improvement in the University of Michigan consumer sentiment index may encourage the US Dollar to return to a stronger footing heading into the weekend, though.

Oil Rally Boosts Canadian Dollar Demand

Oil prices maintained a positive trend overnight, benefitting the commodity-correlated Canadian Dollar. With Brent crude trending comfortably above US$62 per barrel, fuelled by lingering hopes of further US-China trade progress, CAD exchange rates saw some modest gains. However, as investors began to brace for today’s labour market data the potential for Canadian Dollar strength proved limited.

While no change is expected from the headline unemployment rate the underlying details of the jobs report may dent the Canadian Dollar tonight.

Global Trade Anxiety Limits New Zealand Dollar Support

As doubts over the possibility of an imminent US-China trade breakthrough mounted the New Zealand Dollar fell out of favour. With global trade tensions looking set to persist for the foreseeable future even if the two sides agree a preliminary deal NZD exchange rates were left to trend lower.

In the absence of any fresh domestic data releases today the New Zealand Dollar is likely to remain on the back foot.

Data Releases

November 8th 10:30 AUD Reserve Bank of Australia Statement on Monetary Policy
November 8th 17:00 EUR German Trade Balance (SEP) 18.8 billion
November 8th 23:30 CAD Unemployment Rate (OCT) 5.5%
November 9th 01:00 USD University of Michigan Consumer Sentiment Index (NOV) 95.9

Louisa Heath