Pound Sterling (GBP) Slips Against NZD, CAD and AUD on Brief Risk Rally

Modified: Friday, 25 November 2016 12:35 BST - Written by John Cameron

STORY LINK Pound Sterling (GBP) Slips Against NZD, CAD and AUD on Brief Risk Rally

The Pound slipped against the Australian Dollar and New Zealand Dollar on Friday morning as risk traders finally indulged on this week’s strong commodity news. However, worries of the effectiveness of OPEC’s oil output cap deal weighed on the oil-correlated Canadian Dollar.

GBP/AUD had lost almost all of its weekly gains by Friday morning despite Thursday’s recovery attempts, falling to just above weekly lows of 1.66. GBP/NZD saw similar movement but was likely to end the week well above the opening level of 1.7612. Lastly, GBP/CAD could end the week near its highs of 1.68 due to weakness in the ‘Loonie’.

Pound (GBP) to New Zealand Dollar (NZD) Rate Falls from Highs on Risk Rally

Friday’s Asian session saw traders indulging in risk-correlated currencies for the first time in a while. As US markets were closed to observe the Thanksgiving holiday, the usually dominative US Dollar trended weakly, giving major commodity-correlated risk currencies some breathing room.

The New Zealand Dollar was one of the currencies to benefit most, pushing GBP/NZD down from its highs and closer towards the week’s opening levels.

This was also possible due to a weaker Pound, as bullish GBP trade following Wednesday’s Autumn Statement began to fade and Sterling fell limp.

Next week will be quiet for domestic NZD factors, meaning the ‘Kiwi’ is more likely to be influenced by global risk movement or the Pound itself, which could be influenced by Brexit news or Markit’s UK November Manufacturing and Construction PMIs.

Pound (GBP) to Canadian Dollar (CAD) Fluctuates Near Highs, OPEC Meeting in Focus

Despite Sterling weakening on Friday, it was able to more easily hold its ground near the week’s best levels due to concerns about the oil market weighing heavily on Canadian Dollar demand.

The oil-correlated Canadian Dollar performed poorly for the second half of the week as investors predictably began to grow concerned about whether OPEC’s plans for an oil output cap would really have a strong effect on oil prices.

This led to oil prices falling from their highs which has heavily weighed on the Canadian Dollar despite its otherwise strong performance in the last few weeks.

OPEC meets on the 30th of November and is expected to lay out details of its oil output cap among member nations. It’s speculated that even some non-members like Russia will cooperate.

While oil prices and CAD weakened towards the end of this week, they will inevitably strengthen again next week on excitement as the OPEC meeting approaches.

Pound (GBP) to Australian Dollar (AUD) Gives up Gains on Iron Ore Bullishness

While the Pound attempted to hold above the week’s opening levels against the Australian Dollar on Thursday due to optimism after Wednesday’s Autumn Statement from UK Chancellor Philip Hammond, the ‘Aussie’ proved surprisingly resilient and pushed GBP/AUD back to near the week’s worst levels.

The Australian Dollar had been one of the best performing currencies versus the Pound on Wednesday and Thursday and was able to hold GBP’s most bullish behaviour at bay.

Traders had been buying into the Pound amid relief that the Autumn Statement had not been as bearish as feared, as well as optimism towards its announcements that the UK government would be spending £23b on infrastructure and innovation over the next half decade in order to boost Britain’s economic growth.

However, demand for the ‘Aussie’ kept the antipodean currency afloat largely thanks to this week’s 10% surge in iron ore prices. Iron ore is Australia’s most lucrative commodity and demand has improved due to higher prices in steel and coal.
The Australian Dollar could continue to push back against GBP/AUD next week if USD bullishness fades further and iron ore prices continue impressing.

However, with Federal Reserve rate hike bets still at over 90%, underlying demand for the US Dollar and risk-aversion could weigh on demand for the ‘Aussie’ and other risky currencies in the coming weeks.

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TAGS: Australian Dollar Forecasts Canadian Dollar Forecasts Pound New Zeal Forecasts