The U.S. dollar is on the defensive on Tuesday. The pound has posted gains, while the Aussie and NZ dollar continues to gain ground after starting the week with sharp gains.
GBP/USD has posted slight gains for a third successive day and is currently at its highest level since November 18th. In European trade, GBP/USD is trading at 1.2970, up 0.24% on the day. On the economic front, BRC Retail Sales Monitor recorded a sharp drop of 4.9%, compared to the estimate of -0.4%. This points to weak consumer demand, which is bad news for the British economy.
The British manufacturing sector has been struggling, with Manufacturing PMI readings mired below the 50-level, which separates contraction from expansion. In October, the PMI improved to 49.6, but slipped lower in November, with a reading of 48.9. Still, this figure beat the forecast of 48.3 pts. Next up is Construction PMI, which has also been pointing to contraction. The PMI came in at 44.2 in October and the estimate for November stands at 44.5 pts.
Only a week ago, Boris Johnson and his Conservatives had a comfortable 11-point lead in the polls ahead of Labour. That lead has fallen to 6-9 points in the latest polls, which could translate into neither party winning a majority. With less than two weeks until Election Day, the uncertainty of a tight race could weigh on the British pound.
GBP/USD is moving closer to the 1.300 level, which has psychological significance. This line was last tested on October 21st and a break above this line could give the pound additional momentum. On the downside, 1.2925 has switched to a support role. This is followed by the 50-EMA line at 1.2765.
USD/CNY is currently trading at 7.0456, up 0.11% on the day. There are no Chinese events on the schedule. On the technical side, the 50-EMA is touching the candlesticks, which could signal a change in the trend.
AUD/USD has gained over 1.0% this week, as the pair is basking in a 3-week high. Currently, the pair is trading at 0.6850, up 0.48% on the day. The RBA maintained the benchmark rate at 0.75%, as expected. The Aussie received a boost from a strong current account surplus, which widened from A$5.9 billion to 7.9 billion. This was the second straight surplus after a long string of deficits. We could see more movement from the Aussie, with the release of GDP on Wednesday.
NZD/USD has followed the Aussie and has racked up gains of 1.5% so far this week. Currently, the pair is trading at 0.6523, up 0.32% on the day. On Wednesday, New Zealand releases ANZ Commodity Prices.
Kenny is an experienced market analyst, with a focus on fundamental analysis. Kenny has over 15 years of experience across a broad range of markets and assets –forex, indices and commodities.
