Brexit might be the favourite child of the media these days, but there’s plenty more on the horizon that could cause significant volatility for the currency markets in 2018. So, what catalysts for exchange rate shifts should you be aware of?
- UK trade deficit forecast to widen
- Analysts predict British factory output will rebound
- US wholesale inventories also expected to rally
The pound is expected to come under some pressure later this morning as the UK publishes its latest trade balance figures.
Economists forecast that Britain’s trade deficit will have grown from £1.4bn to £2.2bn in November as the nation’s trade balance continues to retreat from the five-month high struck in September.
Such a shift would also move figures away from the long-term average of -£1.44bn.
The UK’s trade deficit remains a major concern for many GBP investors as the long promised boost to trade, driven by the weaker pound, has repeatedly failed to materialize.
However, markets may still be pleasantly surprised by the latest trade figures if they show that exports from the UK continued to accelerate at a similar pace to October.
British factory output forecast to rise
Potentially offsetting any losses for Sterling emanating from the trade figures, however, will be the accompanying industrial production figures, with analysts predicting that factory output will have climbed 0.3% over the same period.
Analysts predict that output will have climbed from 0.1%, with the expected rise supported by an exceptionally strong Manufacturing PMI in November as factory activity rocketed to a 51-month high.
However, the year-on-year figures may prove to be a little gloomier as economists forecast that annualised growth will have tumbled from 3.9% to 2.8% over the previous twelve months.
This will also leave production dangerously low ahead of December’s reading, which is expected to be notably lower following the disruption caused by the cracks found in the North Sea pipeline.
Analysts predict US wholesale inventories will rebound
The US dollar may be able to build on its recent gains later this afternoon as the US Commerce Department publishes its latest wholesale inventory figures.
Economists forecast that inventories will have rebounded from -0.4% to 0.7% in November as businesses stocked up in preparation for the Black Friday sales.
Markets will be hopeful that the increased inventory investment will help bolster economic growth in the fourth quarter.
However, some observers note that stocks may continue to come in lower than expected in November as many Americans will still be replacing their vehicles after the two hurricanes in September – which will likely drag on auto inventories.
Wednesday, 9 January, 2018
09:30 GBP Trade Balance
09:30 GBP Industrial Production
15:00 USD Wholesale Inventories
Joining the corporate trading desk in 2007, Phil now overseas all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FSA approval and has completed the Certificate in International Treasury Management (CertiTM)