FX round-up: Pound under pressure despite economic data, Swedisk krona sinks

Cable came under selling pressure despite much-better-than-expected data on gross domestic product and retail sales and a large jump in Gilt yields versus similarly-dated US Treasuries, on both the short and long ends of the interest rate curve.

Third quarter gross domestic product expanded at a 0.5% quarter-on-quarter pace, according to ONS, soundly beating forecasts for growth of 0.3%.

In parallel, the Confederation of British Industry´s reported retail sales balance for October jumped to +21 from -8 in the month before (consensus: -5.0).

As of 2122 BST the pound was off by 0.64% to 1.2169 against the greenback, while the US dollar spot index was higher by 0.28% to 98.90.

Gains in the US dollar also saw it climb 0.71% against Japan´s yen to finish at 105.20.

Nevertheless, the 'big move' of the session was the dollar´s surge against Sweden´s krona; it rose 1.89% to 9.0725 as the Riksbank sigalled a more dovish stance following its policy meeting.

The US dollar hit a fresh 52-week high against the Scandinavian country´s currency at 9.0907.

Shadowing moves by other central banks perhaps, rate-setters in Stockholm left the door open to a further extension of quantitative easing in December and said the odds of a further interest rate cut had increased.

All of the above came about as Fed funds futures continued to creep higher and were left discounting a 78.5% probability of a 25 basis interest rate hike by the US Federal Reserve at its 14 December meeting.

As ever, the Chinese yuan was not far from traders´ minds, with Michael Every, Rabobank´s Asia Pacific Head of Financial Markets Research, telling clients that: "a huge deflationary threat still lurks in China ahead. Note capital outflows are accelerating again, and CNY and CNH are under downwards pressure: 6.80 appears to be the new 6.70, but once we break through that imminent barrier, we only have 6.83 (where CNY was pegged from 2008-10) before we are in new territory.

"This comes as the risks of a hard landing from the frenetic housing bubble – not simply ‘turned off’ by macro-prudential measures - loom for 2017."

Among the major currency pairs, Euro/dollar fared better, closing down by only 0.1% to 1.0898.

Significantly, data from the European Central Bank revealed that private sector credit flowed at an annualised 2.0% pace in September, up from 1.5% in August.

Be that as it may, economists at Barclays were a tad cautious, saying: "Both credit to households and non-financial corporation (adjusted for sale and securitisazion) remained unchanged for the second consecutive month. While this is not great news, it is not sufficient evidence to anticipate the end of the recovery cycle in lending. We recommend following closely future M3 reports to ensure this is not the case."