Sterling volatility forecast on UK Autumn Budget

• GBP down from best levels before Autumn Budget  
• Climbing confidence could boost EUR
• NZ retail sales may leave NZD weaker

Hammond’s Autumn Budget to dictate Sterling sentiment

After getting off to a strong start to the week on renewed optimism about Brexit negotiations, Sterling moved away from its best levels in reaction to a disappointing UK public borrowing report. 

The pound could extend losses today if Chancellor Philip Hammond’s Autumn Budget is light on economic stimulus.

A gloomy assessment of the UK economic outlook from the Office for Budget Responsibility (OBR) could also weigh on the pound in the hours ahead.

However, if UK growth forecasts aren’t revised and Hammond does outline some feasible spending plans, Sterling has the potential to advance to its best levels of the week so far. 

Climbing consumer confidence could boost euro

With German coalition talks breaking down and the political landscape of the Eurozone’s largest economy looking rocky at best, the euro struggled to gain much traction on Tuesday.

However, German President Frank-Walter Steinmeier is keen to avoid another general election and is pushing for party leaders to restart coalition talks. If they do resume, any progress in forming a working government would be euro-positive.

The common currency could also receive a modest boost later today if the Eurozone’s consumer confidence index shows an improvement in sentiment. The measure is currently forecast to rise from -1 to -0.9. 

New Zealand dollar unfazed by dairy price decline, sales data ahead 

Although the price of New Zealand’s key commodity, dairy, declined during the latest Global Dairy Trade auction, New Zealand dollar exchange rates proved surprisingly resilient.

However, NZD could drift lower during the Australasian session if upcoming retail sales data for New Zealand shows a decline in consumer spending.

Retail sales growth is believed to have plummeted to 0.1% in the third quarter, down from 1.7% in the second.

Higher-risk currencies like the New Zealand and Australian dollars may also come under pressure later today if the afternoon’s US news (including durable goods orders data and the minutes from the last Federal Open Market Committee (FOMC) meeting) keep the Fed firmly on course to raise interest rates for a third and final time in December.

Upcoming Data

Wednesday, 22 November, 2017

12:30             UK Chancellor presents budget to parliament  
13:30             US Durable goods orders (OCT)  
15:00             EUR Eurozone consumer confidence (NOV)             
19:00             US FOMC meeting minutes
21:45              NZ retail sales excluding inflation (Q3)