Daily Market Commentary

Tuesday, 17 October 2017 - Market Commentary

Hamish Muress

United States Dollar

There was a slight reprieve overnight for the UK and Prime Minister Theresa May as she announced alongside President of the European Commission Jean-Claude Juncker, that Brexit negotiations would ‘accelerate over the months to come’ following a working dinner. This followed a relatively quiet day for the pound with no data releases but, much like the weather, it could be the calm before the storm as the rest of the week is sure to cause a lot more volatility with the potential for GBP/USD to strike above the significant 1.35 level or drop to 1.30. The key question will be whether the Bank of England optimism can outweigh the Brexit uncertainty. There are reports in the market though that if the UK has not made any substantial progress on trade negotiations in the next few months, they may have to ask for an extension on the current regime. Watch out today for the latest UK inflation figures released at 9.30am.

For the US dollar, the big news came late on as reports indicate that the hawkish, rules based John Taylor impressed Trump the most during his interviews for the Chair of the Federal Reserve. There is apparently a 90% chance that current Chair Janet Yellen will lose her job in February, however she will be given the opportunity to interview for it in front of the President this week.

We expect a range today in the GBP/USD1.3200 to 1.3380

Euro

For the euro yesterday the data was all about the latest Eurozone trade data which showed their trade surplus slipping compared to a year ago. However geopolitical uncertainty is continuing to take precedence at the moment as the Spanish Prime Minister warned Catalan has 8 days to drop their bid for independence before their autonomy is suspended. Indeed we have already seen further negativity this morning as Spain has cut its 2018 growth forecasts to 2.3% from 2.6% due to this political uncertainty. German ZEW economic sentiment will be released this morning but expect it to be overshadowed by the continued Spanish/Catalonia indecision.

We expect a range today in the GBP/EUR rate of 1.1150 to 1.1380

Aussie and Kiwi Dollars

Overnight, Reserve Bank of Australia minutes showed that the central bank sees no need to raise interest rates in 2018, which is unsurprising and only confirms what the market already knew. Historically, the Aussie dollar has dropped in the past following comments that AUD strength could cause output and employment to wane so comments overnight that the domestic economy is upbeat will be welcomed by the market. For the New Zealand dollar, quarterly inflation numbers beat expectation overnight as the figure came out at 0.5%. Most of the growth was driven by volatile food and fuel prices but at the moment inflation is well within the central bank’s target.

We expect a range today in the GBP/AUD rate of 1.6820 to 1.6995

We expect a range today in the GBP/NZD rate of 1.8100 to 1.8240

Data Releases

AUD: No data

EUR: German ZEW Economic Sentiment

GBP: CPI y/y, BoE Governor Mark Carney speaking

NZD: No data

USD: FOMC Member Harker speaking

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