Sterling continues to strengthen in spite of election polls

Today's Highlights

• Sterling continues to strengthen in spite of election polls

• USD weaker as Trump tears through proposals

• CAD hit by US timber and NAFTA announcements

Current Market Overview

All eyes were on America as Donald Trump said he will renegotiate the North America Free Trade Agreement (NAFTA) or terminate it, but the agreement is safe for now. The US President also warned that “There is a chance that we could end up having a major, major conflict with North Korea,” although he did say he would prefer to resolve the tension through diplomatic means.  He went on to say he would like to scrap the ‘Horrible Horrible’, South Korean trade deal. I heard the president’s first 100 days in office described as the ‘Bonfire of the insanities’ and his keenness to stir things up does kind of fit that moniker. The US Dollar is continuing to weaken ahead of this afternoon’s Gross Domestic Product data. A sharp slowdown is forecast, so beware the USD.
 
As you might imagine, the Canadian Dollar weakened further on that announcement and GBP-CAD is pushing up to levels we haven’t seen since before the Brexit vote. This recent announcement adds to concerns over US timber levies, which would severely damage Canada’s exports to their southern neighbour. C$1.75 was a level at which GBP buyers filled their boots in the second half of 2014 and it proved an immovable object when the Pound bounced back after the Brexit vote. Sterling has pushed through that and is testing just below 1.77 right now. If that retracement level breaks, 1.83 is a distinct likelihood. This afternoon brings Canadian economic growth data and the forecasts are very mixed. Be ready for GBP-CAD volatility at 12.30 GMT.
 
In fact, the Pound is testing a number of significant technical levels as it strengthens. AUD 1.73 is significant, Sterling is pushing towards NZD 1.90 and is threatening to test USD 1.30. All are levels that mark a change of trading ranges and the Pound is battering at the doors of all. If this morning’s preliminary GDP data for the UK is as bullish as some have suggested, the Pound could well flex its muscles again at the end of this week and this month.
 
The weakness in the NZD comes in spite of an upbeat business confidence report released overnight. A net 11% of businesses see positive activity ahead and that is in line with last month’s report. The fact that businesses are still looking to recruit and invest is good news for the Reserve Bank of New Zealand (RBNZ) but probably won’t cause a knee jerk rate hike at this stage.
 
Monday is a public holiday in many countries. In fact, Denmark is the only major European Market that will be open on the day. So, volatility is a very likely scenario. There are cost-free ways and means to take advantage of that and to protect yourself against the worst the market can throw at you. Have a word with your Halo Financial contact to find out how that could work for you.
 
Meanwhile, have a lovely long weekend.