Many
investors would be wondering whether Barnier’s statement could be a turning
point for the Pound. Although many issues related to trade and the Irish border
are far from being resolved, it currently seems that negotiations may begin
moving in the right direction. If positive news flows continue when Brexit
Secretary, Dominic Raab, heads back
to Brussels on Friday to resume talks, GBPUSD may quickly return to July highs
that were above 1.33. However, expect volatility to surge in the coming weeks
as we get closer to the Brexit deadline.
Positive
news was also flowing from the U.S. leading to new record highs in the S&P
500 and the Nasdaq. President Trump
is optimistic that Canada will join Mexico’s and the U.S.’ trade agreement.
Canadian Prime Minister, Justin Trudeau,
also shared Trump’s optimism indicating there’s a possibility a trade deal that
includes Canada could be reached by Friday. With U.S. midterm elections about
two months away, we believe Trump wants to strike deals, not just with Mexico
and Canada, but probably the European Union too. This should continue fueling
the rally in equities at least in the short run given that economic
fundamentals and earnings remain robust.
In
Australia and New Zealand, the situation is looking gloomier. AUDUSD fell 0.4%
on Wednesday after Westpac, one of the largest nation’s banks raised mortgage
rates by 14 basis points as funding costs increased. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
This move may lead to further delaying an interest rate hike by the Reserve
Bank of Australia as more banks are likely to follow Westpac’s actions leading
to lower disposable incomes for consumers already struggling with low wage
growth. The currency lost another 0.4% today after capital expenditures
unexpectedly fell 2.5% in Q2 which will become increasingly worrying if such a
trend continues.
The
New Zealand dollar is the worst major performing currency today. NZDUSD fell
almost 1% in the Asian trading session after business confidence fell to -50.3%
in August, a level not seen since April 2008. These figures are likely to be
reflected in lower GDP growth for Q3 and lowering interest rates may be taken
into consideration. Thus, expect to see further declines in the currency until
economic data starts pointing north again.
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