Market Info

From tax plans to Super Thursday – markets wake up

14/09/2017 | OzForex

United States Dollar:

Yesterday afternoon the USD was excited by positive developments regarding a potential tax reform plan. The USD rallied as Paul Ryan announced he wanted the reforms in place by the end of the year and it is expected another announcement will be made on September 25th. This was a major policy pledge by President Trump on his campaign trail and if he can get it through Congress it will certainly be Trump’s biggest legislative success to date. The plans thus far are vague but analysts are looking at the broad-based Republican support for tax reform and so they are hopeful the reforms will be approved. Off the back off this announcement the dollar surged strengthening around 0.63%. Today will see the release of the latest monthly inflation figures for the USA.

For the pound, the news surrounded the latest UK unemployment report. UK unemployment fell to a 42 year low of 4.3% for July. Whilst this headline figure was quite impressive the pound fell off the back the news that average earnings only rose 2.1% in the last quarter. This means that earnings are rising at a slower level than inflation (2.1% vs 2.9%) and whilst there are more and more people in work, they are in effect getting poorer. It is Super Thursday today and with the MPC due to announce its latest interest rate decision there is some speculation that the Bank of England Chief Economist Andrew Haldane may have joined the hawks, Michael Saunders and Ian McCafferty in voting for a hike in interest rates to address above target inflation. However, this weak report may mean he sits on his hands a while longer so not to add extra pressure to consumers already suffering from rising prices. If the bank are particularly hawkish, market analysts are expecting significant GBP strength. However, if they look beyond the latest inflation figure and focus on Brexit uncertainty instead then the pound could drop down to GBP/USD 1.31.

We expect a range today in the GBP/USD1.3200 to 1.3450

Euro:

It has been a quiet week for the Eurozone economy and yesterday was not any different. There was the latest insight in the form of employment growth which expanded 0.4% for the last quarter and whilst this was slightly slower than Q1 this was due to a drop in construction and professional service jobs. There is a correlation between increased overall job growth and trust in the Eurozone economy, something that EU Commissioner touched upon in a speech yesterday. EUR/USD weakened due to the US tax reform announcement in the afternoon and with no major data from the Eurozone this week the euro will continue to take its cues from events elsewhere. There is a long wait until next week’s German ZEW economic sentiment.

We expect a range today in the GBP/EUR rate of 1.1060 to 1.1200

Aussie and Kiwi Dollars:

The Australian dollar is continuing its broad recovery and it’s expected to maintain this through to the end of the year. Overnight the latest Australian jobs report smashed expectations as an extra 54k people were added to the workforce against an expected 20k. GBP/AUD has opened just above 1.65. Overnight ANZ cut their forecasts for New Zealand GDP to 0.7% for Q2 which is a big drop from 1%. However, consumer confidence is up in the economy and reached a 3 month high. This shows an ongoing and sustained pace of spending and with elections around the corner it would appear that any uncertainty these could cause is being shrugged off by New Zealand residents.

We expect a range today in the GBP/AUD rate of 1.6420 to 1.6600

We expect a range today in the GBP/NZD rate of 1.8190 to 1.8300

Data Releases

AUD: No data

EUR: No data

GBP: MPC Official Bank Rate Vote, Monetary Policy Summary, Official Bank Rate

NZD: Business NZ Manufacturing Index

USD: CPI m/m, Core CPI m/m, Unemployment Claims

 

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