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By xemarketanalysis December 5, 2017 2:47 pm
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    XE Market Analysis: Pound Falls Further on Brexit Disappointment

    OVERVIEW

    • USD steadies after the solid rise.
    • UK service sector PMI falls more than expected.
    • EU services PMI is at a 6-month high. 
    • Australian retail sales bounce, RBA stands on hold.
    • South Africa's economy grew more than expected.

    HIGHLIGHT

    The Pound fell further in the European session as the fallout from yesterday's no Brexit deal continued to weigh on the currency. After originally agreeing on an EU-UK draft referring to the regulatory agreement, Theresa May was forced to seek more time to discuss the plans for the Northern Ireland border with her allies in Belfast. A number 10 official said this morning that the PM will meet with the DUP today and could return to Brussels as early as tomorrow, but uncertainty is once again hanging over negotiations.

    US DOLLAR

    The US Dollar steadied after posting solid gains yesterday as markets reacted to the Senate passing their tax bill. The House of Representatives voted 222-192 to go to conference with the Senate, setting up formal negotiations on the legislation that could take weeks to complete that is prompting some caution. Today's ISM services PMI for November is set to slip to a still-respectable 59.0 in November, from 60.1 in October.  

    BRITISH POUND

    The Pound is off its lows for the day on hopes that a deal can be reached this week, shrugging off a much weaker than expected PMI services that fell to 53.8, from 55.6 in October (see highlight).

    EURO

    The Euro is edging higher and is supported by the Eurozone PMI that showed business activity accelerated in November as firms struggled to meet booming demand, with the PMI unchanged at 56.2.  

    CANADIAN DOLLAR

    The Canadian Dollar is higher versus its US counterpart and is at its highest level since late October despite a fall in oil prices due to rising supply. The correlation between oil prices and the Canadian Dollar has weakened since the Bank of Canada began raising rates this year, proving that the hunt for yield is one of the primary drivers for investors in currencies. 

    AUSTRALIAN DOLLAR

    The Aussie Dollar hit a three-week high after data overnight showed retail sales rose 0.5% in October, exceeding forecasts for a 0.3% gain. The RBA signaled they were more comfortable with the level of the currency. Higher iron ore prices were also adding to the positive view for the Aussie ahead of GDP data for Q3 that could show the economy grow at a faster pace than the previous quarter.

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