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Geo-Politics Bring the Pound and the EUR into Focus

Bob Mason
A quiet day on the data front could see the Pound and the EUR under pressure, with Brexit and the Italian coalition government in action.

Earlier in the Day:

Economic data released through the Asian session was on the lighter side this morning, with key stats limited to 3rd quarter wholesale inflation numbers out of New Zealand and October trade figures out of Japan.

Outside of the numbers, Bank of Japan governor Kuroda was scheduled to speak later in the session.

For the Kiwi Dollar, the producer price index input rose by 1.4% in the 3rd quarter, coming in ahead of a forecasted 0.8% increase following a 2nd quarter 1% rise.

  • The increase was attributed to a surge in fuel costs, with the prices that businesses were required to pay for petrol and diesel up 6.9% and 7% in the quarter.
  • Other petroleum products that include aviation fuel was up 3.7%.
  • Fuel costs have been on the rise for 4 consecutive quarters to take petrol and diesel costs up 22.5% and 37.8% respectively, year-on-year.
  • Output prices increased by 1.5% over the quarter.

At the time of writing, the Kiwi Dollar stood at $0.6851, down 0.39% for the session.

For the Japanese Yen, the trade balance stood at a deficit of ¥449bn in October, which was a much larger than forecasted than forecasted deficit of ¥70bn, following September’s ¥131bn surplus.

  • Exports rose by 8.2%, falling short of a forecasted 9% increase, following September’s 1.3% fall.
  • Imports jumped by 19.9%, coming in well ahead of a forecasted 14.5% increase, following September’s 7% rise.
  • Exports to China rose by 9%, while imports jumped by 16.1%, with exports to the U.S rising by 11.6%, while imports surged by 34.3%. Following last month’s trouble export figures to the EU, exports rose by 5.7% to the EU driven by exports to Ireland and Germany, while imports rose by 9.5%.

The Japanese Yen moved from ¥112.7 to ¥112.767 against the U.S Dollar, upon release of the figures, before rising to ¥112.73 at the time of writing, a gain of 0.09% in the early part of the session.

Elsewhere, the Aussie Dollar was down 0.27% to $0.7312, at the time of writing, with trade war jitters reversing the effects of some dovish commentary from FED vice chair Richard Clarida at the end of last.

In the Asian equity markets, the Nikkei, the Hang Seng and CSI300 were all on the move at the start of the week, the Nikkei leading the way with a 0.52% rise ahead of the close, while the ASX200 troubles also continued following last week’s 3.23% slide, the index down 0.54%, at the time of writing, energy stocks and the big-4 banks under pressure.

The Day Ahead:

For the EUR, there are no material stats scheduled for release through the day, leaving the EUR in the hands of market sentiment towards Italy that is never a good thing ahead of this week’s EU Commission decision on whether to hit Italy with sanctions should the coalition government continue to stand firm in the final hour..

At the time of writing, the EUR was down 0.10% to $1.1404.

For the Pound, it’s also a quiet day on the data front, with no material stats scheduled for release through the morning, leaving the Pound in the hands of Brexit updates through the day, pressure on the British PMI mounting, with the threat of a vote of no confidence this week also there for the markets to consider..

At the time of writing, the Pound was down 0.01% to $1.2833, with Brexit news the key driver through the day.

Across the Pond, there are no material stats scheduled for release, with the Dollar having taken a hit at the end of last week following some dovish comments from FED vice chair Clarida. While there are no stats to consider, FOMC member Williams is scheduled to speak later today, with any dovish commentary likely to add further pressure on the Dollar.

Other influences through the day will include market risk sentiment, with U.S – China trade talks, Brexit, an Italy – Brussels showdown and Capitol Hill all in focus through the day.

At the time of writing, the Dollar Spot Index was up 0.03% to 96.495, with Capitol Hill and geo-political risk in focus through the day.

For the Loonie, it’s a quiet start to the week, with no economic data scheduled for release to leave the Loonie in the hands of risk sentiment and the direction of crude oil prices, which are expected to find some support on hopes that OPEC and Russia will agree to cut output going into the New Year. Further upside could come from a resolution to the U.S – China trade war, though few are expecting an agreement until the New Year.

The Loonie was down 0.10% to C$1.3161 against the U.S Dollar at the time of writing.

This article was originally posted on FX Empire