British Pound Under Pressure as UK Budget Statement Looms Ahead
- British Pound falls as UK Autumn Budget Statement looms ahead
- Eurozone PMIs may pass unnoticed on limited ECB policy impact
- November FOMC minutes likely moot with 2017 rates path eyed
The British Pound traded broadly lower for a second day in a move that could reflect pre-positioning ahead of the UK Autumn Budget Statement due to be presented by Chancellor Hammond today. A downgrade of growth and public finances projections reflecting the cooling effect of the Brexit referendum and the new government’s somewhat expansionary fiscal posture are likely.
Mr Hammond seems to have relatively little room for lavish government outlays. Indeed, he has himself acknowledged that UK government debt is worryingly high. This suggests the markets may be readying for a scenario where an underwhelming fiscal effort beckons a more accommodative posture from the Bank of England as growth slows, pressuring Sterling.
November’s preliminary Eurozone PMI surveys seem unlikely to spark a meaningful response from the Euroconsidering their limited implications for near-term monetary policy. Firm numbers in line with recently upbeat regional news-flow probably mean little after comments from ECB President Mario Draghi implied that the central bank is essentially keeping the economy on life support.
Minutes from November’s FOMC meeting may likewise pass with little fanfare. Fed Funds futures already price in a 100 percent probability of a rate hike in December, so it appears that there is not much insight to be gleaned from the account of the sit-down. The 2017 rate hike path is now at the heart of speculation, and Fed officials themselves have intimately linked this to the on-coming fiscal policy pivot.
The Australian Dollar outperformed in overnight trade as most Asian stocks advanced, offering support to the sentiment-sensitive currency. The likewise risk-geared New Zealand Dollar followed suit. Regional shares picked up on the lead set by another strong upward push on Wall Street, where the benchmark S&P 500 index advanced to a record high.
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