Headlines
- Pound unmoved by BoE decision – Interest rates held at 0.5% for 70th month.
- GBP/EUR up 0.3 cents – German factory orders underwhelm.
- Sturdy US NFP on tap – GBP/USD close to July 2013 lows.
- Pound remains weak vs. commodity currencies – GBP/NZD hits lowest level since last April.
Sterling
As testament to Britons’ disinterest in the Bank of England’s latest policy decision, it was a shake-up at supermarket giant Tesco that stole the headlines yesterday. New Tesco boss ‘drastic Dave’ Lewis announced a massive raft of price cuts, the closure of 43 unprofitable stores and the axing of 49 planned new stores – including one that has already had a river moved to make way for it. The shock decision means that thousands of people are set to lose their jobs, which could have a negative impact on the British labour market. Oh, and the Bank of England opted to leave interest rates on hold at the current record low of 0.50%.
The Pound to Euro exchange rate rallied by around a third of a cent yesterday as European traders reacted to an early morning economic report out of Germany showing that factory orders declined by -0.4% in November. The downbeat reading weighed on sentiment to the single currency because the currency bloc’s largest economy (Germany) is heavily reliant on its illustrious export sector. The Euro also ran into trouble as Eurozone economic confidence came in weaker-than-expected at 100.7 and industrial confidence plunged from -4.3 to -5.2. However, a sturdy 1.5% rise in Eurozone retail sales did give the single currency a little bit of support.
Despite the recent drop in confidence towards the Pound, GBP/EUR is liable to appreciate over the next three weeks as the threat of a Greek exit from the Eurozone becomes more serious in the run up to the Hellenic nation’s snap general election on January 25th.
The Pound slid to its lowest level against the US Dollar since July 2013 yesterday, as technical sentiment continued to point towards a weaker Sterling / US Dollar rate. The way things are going it looks increasingly likely that GBP/USD could dip below the psychologically significant 1.50 mark over the next few weeks. However, a mid-afternoon relief rally allowed Sterling to recover some of its recent losses during the New York session.
This afternoon’s highly watched US non-farm payroll report is anticipated to show that the world’s largest economy added 240,000 jobs during December, which, although far less than the outstanding 321,000 jobs created in November, is still a rather upbeat result. It is possible that we could see the Pound weaken around the time of the NFP report (13:30 GMT).
Sterling touched its lowest trough since the end of November against the Canadian Dollar yesterday. However, GBP/CAD clawed back its losses during the afternoon as crude oil prices sunk back to the psychologically significant $50 a barrel mark.
Data released this afternoon is tipped to show that the Canadian unemployment rate remained at 6.6% in December. The report is unlikely to have a massive impact on the ‘Loonie’ unless forecasts prove to have been wide of the mark.
Just like it did against most of its other major currency peers, the Pound sunk to a new monthly low against the Australian Dollar yesterday before rising back towards opening levels. The ‘Aussie’ Dollar can be expected to wobble this afternoon if the US NFP report bodes well for the US economy, thus boosting the chances of an interest rate hike at the start of the second quarter. However, a soft payroll report could give the risk-sensitive Antipodean currency the impetus it needs for another day of gains against Sterling.
The Pound to New Zealand Dollar exchange rate tumbled to its worst level since April 2014 yesterday as sour sentiment towards Sterling continued. However, there is potential for the Pound to rally this morning if industrial production data impresses. Analysts expect output to print at 1.6% for November, up from 1.1% in October.
Data Released Today
09:30 GBP Industrial Production (YoY) (NOV) 1.6%
09:30 GBP Manufacturing Production (YoY) (NOV) 2.3%
09:30 GBP Visible Trade Balance (Pounds) (NOV) -£9500
13:30 CAD Net Change in Employment (DEC) 10.0K
13:30 CAD Unemployment Rate (DEC) 6.6%
13:30 USD Change in Non-farm Payrolls (DEC) 240K
13:30 USD Unemployment Rate (DEC) 5.7%
13:30 USD Average Hourly Earnings (YoY) (DEC) 2.2%
15:00 GBP NIESR Gross Domestic Product Estimate (DEC) 0.5%