Major market movements November 2017Both Sterling and the US Dollar continue to be impacted by political news this month. USD has lost ground due to tax reform delays last week. With a number of British ministers embroiled in controversy and increasing pressure on Theresa May, the immediate outlook looks particularly worrying for Sterling. Further political volatility could negatively impact Brexit negotiations, with the potential to further destabilise Sterling. Confidence in Sterling is at a low, with fresh challenges to Theresa May’s leadership on the horizon, and hints of Brexit talks failure from the EU’s chief Brexit negotiator Michel Barnier. This week’s ‘withdrawal bill’, which provides the domestic legislation required to take the UK out of the EU, is another potentially destabilising issue which will lead to uncertain market movements.
UK SterlingIt’s been a roller coaster start to November for Sterling. Having seen positive moves at the beginning of the month, this week saw GBP-USD trading at 1.3061 on November 14th. With two cabinet minister resignations hitting Theresa May’s already fragile government, the markets have reacted nervously, resulting in a November 15th GBP-EUR exchange rate of 1.1132 with CurrencyFair – near levels last seen at the end of October. Longer term prospects are also looking questionable. Currency strategists see the Sterling weakening substantially next year because of changes surrounding the UK’s widening deficit in traded goods. Figures released in September by the UK National Statistics Office showed an overall imbalance between imports and exports, or that the UK imports more than it exports. The GBP-AUD exchange rate dropped on Tuesday, November 14th after the release of UK Inflation data weakened Sterling. Inflation in the UK was lower-than-expected in October at only 3.0%, having been forecast to rise to 3.1%. The Sterling to Australian Dollar exchange rate was trading at $1.708 after the release of this report, but has since rallied to $1.735 (as of November 15th with CurrencyFair). One currency that the UK Sterling is appreciating against is the USD. Having gone as low as 1.3013 on November 4th, GBP/USD exchange rate has risen and was available at 1.316 November 16th with CurrencyFair.
US DollarThe US Dollar endured a difficult few weeks, suffering due to President Trump’s highly publicized tax reform, which faced delays until 2019. Investors who bought into the US Dollar following Trump’s victory last year – hoping for tax cuts and infrastructure spending to bolster wages and inflation – have been sorely disappointed. However it wasn’t all doom and gloom for the US Dollar. Threats to the PM’s position and Brexit talks resulted in a weakened Sterling, with USD/GBP available at £0.7644 on November 3rd. The US Dollar also made gains last week against the Canadian Dollar. USD-CAD was 1.2609 (as of November 11th with CurrencyFair) but the release of the US Producer Price Index (PPI) data saw the Dollar make a comeback, with CAD available at 1.272 on November 15th. NAFTA talks taking place this week will continue to influence the currency pair, as Canada exports 75 percent of its production to the United States.
EuroDespite ongoing trouble in Catalonia, the single currency has been the strongest performer this week, as Sterling and Dollar suffered from Brexit and tax reform issues respectively. The Euro to US Dollar exchange rate is trading at $1.1825 (as of November 15th with CurrencyFair) as delays for President Trump’s tax reform legislation in the United States were announced last week – a 2.25% jump after trading as low as $1.1559 November 7th. Early November saw EUR-GBP available at £0.876 (November 1st) with CurrencyFair. After the release on November 14th of the UK inflation data, we saw GBP weaken across all major currencies, with Euro to Sterling then available at £0.8987 November 15th.
Important dates for your diary:
- Nov 17th – CAD Inflation Data released
- Nov 17th – EUR ECB’s Draghi Speaks
- Nov 21st – USD Fed’s Yellen Speaks
- Nov 21st – AUD Governor Lowe Gives Speaks
- Nov 23rd – EUR ECB account of the monetary policy meeting