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Strong Retail Sales Boosted Pound, Australian Dollar Slumps after Unimpressive Employment Data

Published: 17 Nov at 4 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada,

Pound Sterling
While investors had anticipated an uptick in UK retail sales in October, the 7.6% year-on-year jump smashed expectations. This helped to boost demand for the Pound, indicating that consumer confidence has remained robust in spite of the atmosphere of political uncertainty. Even so, worries remain over the Brexit issue and potential threats to Prime Minister May’s deadline for triggering Article 50. With expectations low for the Autumn Statement, Sterling could struggle to find any substantial grounds for a rally in the near future.

In a positive sign for the Eurozone, the October Consumer Price Index was confirmed to have strengthened modestly from 0.4% to 0.5%. Continued progress on inflation, however small, reduces the pressure on the European Central Bank (ECB) to consider further easing measures. Nevertheless the Euro is likely to see volatility in response to comments from ECB President Mario Draghi on Friday, with speculation continuing to favour an extension of the quantitative easing program in December.

US Dollar
Testimony from Fed Chair Janet Yellen to the Joint Economic Committee furthered the impression that the central bank will raise interest rates in December. Yellen’s more hawkish tone offered support to the US Dollar, which remains volatile thanks to the uncertainty surrounding the Trump transition team. A larger dip in jobless claims boosted confidence in the strength of world’s largest economy, particularly as the Consumer Price Index also pointed towards an uptick in inflationary pressure.

Australian Dollar
Reaction to the Australian labour market data was not positive, despite the unemployment rate having unexpectedly held steady at 5.6%. However, with a more limited number of jobs being added to the domestic economy, this result was largely attributable to a lack of change in the participation rate. As the Reserve Bank of Australia (RBA) has expressed reservations over the state of the labour market this did not encourage particular confidence in the outlook of the ‘Aussie’ today.

New Zealand Dollar
While the New Zealand economy has displayed signs of strength recently this has not been enough to keep the ‘Kiwi’ on an uptrend in the absence of fresh domestic data today. Market risk appetite remains generally limited by worries over the future of the US political landscape, diminishing the appeal of the higher-yielding New Zealand Dollar. Investors were also discouraged by the increasing odds of an imminent Fed rate hike, a prospect which could weigh heavily on the ‘Kiwi’.

Canadian Dollar
Despite the latest US crude oil inventories report showing a large increase in stockpiles, the price of oil has nevertheless trended higher on Thursday. In large part this is due to renewed market speculation that OPEC will agree some form of production control at its upcoming meeting, encouraging Brent crude back above the US$47 per barrel mark. This helped to improve the appeal of the Canadian Dollar, although investors are also confident ahead of Friday’s Consumer Price Index data.

As of Thursday, 17th November 2016, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1682, GBP USD exchange rate was 1.2409, GBP AUD exchange rate was 1.6774, GBP NZD exchange rate was 1.7676, and GBP CAD exchange rate was 1.6798.
Dominic Lee About Author: (474 Posts)With over ten years experience as an economist – including four years spent as a chief economist with a major currency broker – Dominic has acquired a wealth of knowledge which he uses to forecast market movements. Dominic now works as an independent business advisor and writes for several financial publications.

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