The Pound in the Spotlight with Trade and Production Figures in Focus

Earlier in the Day:

Macroeconomic data released through the Asian session was on the positive side today, with Japan’s current account surplus widening in August, Australian business confidence improving in September and the UK’s BRC Retail Sales Monitor reflecting a 1.9% year-on-year rise in sales.

Through the early part of the day the was up AUD 0.44% at $0.7787, supported by the upbeat business confidence numbers, while the Yen was flat against the Dollar at ¥112.66 as the markets look ahead to this month’s General Election, with Tokyo Governor Koike’s newly formed Party of Hope seeing support falling from 19% at the end of September to just 13% with just under two weeks remaining. The call for a snap election certainly looks to be paying off for Prime Minister Abe, the Party of Hope having little time to prepare for a strong campaign.

With the Japan Election looking set to deliver the markets choice, uncertainty continues to linger on who will be running the New Zealand government. The final vote count on the weekend had given more seats to both Labour and the Green parties, which is expected to give the respective parties more bargaining power, though the outcome continues to sit in the hands of New Zealand First party leader Peters.

There’s plenty of speculation and there seems to be a rising consensus that Peters will opt for a coalition with Labour and the Greens. Such an outcome is expected to be a negative for the Kiwi in the near term, with Labour Party pledges to reign in on immigration and trade renegotiations expected to weigh on economic growth.

The RBNZ will have a busy time in the coming months and the final outcome of the General Election will need to be a consideration. The Kiwi Dollar was up just 0.01% at $0.7067 off the back of the weaker U.S Dollar, with the gains coming despite more disappointing data out of New Zealand this morning, electronic card sales rising by just 0.1%, falling short of a forecasted 0.7% gain.

The Day Ahead:

Through the European session, the Pound will be in the spotlight, with key stats scheduled for release out of the UK including August trade data and industrial and manufacturing figures. The Pound has taken a beating in recent weeks, after having made a move to $1.36 levels in late September, as the markets continue to shift on sentiment towards monetary policy, following a string of softer economic indicators and the building negative sentiment towards the British Prime Minister and concerns over whether the Tories will be able to avert a crisis that could send Brexit negotiations into disarray.

Both sides of the Brexit negotiation table appear to be passing the buck on where the next move needs to come from, with Theresa May having delivered an update on Brexit to the House of Commons on Monday, which included raising the possibility of a “no deal” Brexit eventuality.

With political uncertainty having a material influence on the Pound, today’s stats are going to need to impress for the Pound to have a chance of a recovery and look to force the BoE’s hand on making a move before the end of the year. The softer Pound will be adding further inflationary pressures, which have reached levels of concern for the BoE and BoE governor in particular.

While focus will be on the trade and production figures, the NIESR GDP Estimate will also have an impact this afternoon, the UK economy having managed to avert a recession despite the negative sentiment surrounding Brexit and UK politics.

The Pound was up 0.22% at $1.3171 at the time of writing with direction through the remainder of the week largely hinged on this morning’s stats.

Across the Pond, focus will now be shifting to the FED minutes scheduled for release tomorrow evening, as the markets look for the FED to make its final move in December, though who will take the top spot continues to be a driving force as Trump looks for Yellen’s replacement, the markets cognizant of the importance of the FED, not just to the U.S economy, but the global economy.

There are no material stats out of the U.S this afternoon to have an impact on the Dollar, with FOMC voting member Kashkari scheduled to speak, who will more than likely continue to protest against a more hawkish outlook on policy, to which the Dollar has become somewhat de-sensitised.

The Dollar Spot Index was down 0.16% at 93.523 at the time of writing, with little to drive the Dollar ahead of tomorrow’s FED minutes and Friday’s inflation and retail sales figures.

For the EUR, a widening of Germany’s trade surplus in August inspired the EUR, which managed to build on to its gains from the Asian session despite an initial softening upon release of the stats, with the data out of the Eurozone continuing to impress.

The EUR was up 0.35% at $1.1781 at the time of writing, while the markets will keep an eye on Spain and Catalan’s calls for independence, with Catalan President Puigdemont scheduled to address lawmakers and quite possibly ruffle the feathers of the Spanish government even further, with Prime Minister Rajoy having already stated that a move to impose direct rule on the semi-autonomous region is an option.