Headlines
Pound up on labour market hopes
– Optimists predict rise in wages.
GBP/EUR close to 7-yr high
– Euro rises minimally ahead of CPI data.
‘Cable’ rebounds from 4.5-yr low
– Fed commentary due this week.
‘Aussie’ down on RBA minutes report
– Central bank leaves door open to further rate cuts.
Sterling
The Pound performed mildly well yesterday, rising against most of the majors as investors geared up for Wednesday’s UK labour market report, which some think could see wages rise and unemployment fall.
The British unemployment rate currently stands at a six-and-a-half-year low of 5.7% but British bulls estimate that the jobless rate could have tumbled to a new low of 5.6% in the three months leading up to January. Additionally, Sterling optimists believe that average weekly earnings could have accelerated from 2.1% to 2.2% during that time, which would likely bolster demand for the Pound due to rising rate hike expectations.
Euro
There were no key European ecostats released yesterday, just footage purportedly showing Greek finance minister Yannis Varoufakis giving ‘Germany’ the middle finger back in 2013. Varoufakis denied ever using the middle finger gesture and claimed that the footage was doctored. The whole affair only acted to worsen relations between the two nations as the threat of an accidental Greek exit – ‘Grexident’ – from the Eurozone appeared to grow.
The single currency, however, managed to appreciate ever-so-slightly against Sterling in anticipation of today’s economic data. Analysts expect the German economic ZEW index to rise from 53.0 to 59.4 and the currency bloc’s consumer price index to increase from -0.6% to -0.3%. Although the European Central Bank is planning to continue purchasing €60 billion worth of Eurozone bonds for at least the next 18 months, regardless of the Euro inflation rate, the slight uptick in European price pressures has the potential to give the single currency a little bit of a boost.
US Dollar
The Pound to US Dollar exchange rate rebounded from a four-and-a-half-year low yesterday as markets looked to lock-in profit from the lowest GBP/USD rate since June 2010.
Domestic data printed negatively for the ‘Greenback’ yesterday, with industrial production sliding -0.2% and housebuilding confidence falling from 55 to 53. The contraction in industrial output was especially damaging to the US Dollar because it marked only the second time since 2009 that production has declined for three months on the trot, which gave rise to a bout of Federal Reserve rate hike pessimism. Indeed, market expectations of a June rate hike could be disappointed later this week if the US central bank fails to strike a hawkish tone in its March policy statement on Wednesday evening.
Canadian Dollar
The Pound rose by around 90 pips against the Canadian Dollar yesterday in response to comments from the International Energy Agency (IEA) suggesting that oil prices may not have bottomed out just yet. The IEA warned that oversupply in the market could continue to weigh on prices before the value of ‘black gold’ starts to rally back towards its historical average. Crude oil plunged to its lowest level of 2015 in reaction to the remarks and this helped Sterling rally against the ‘Loonie’.
Australian Dollar
The Australian Dollar plummeted -160 pips against the Pound yesterday in reaction to comments in the Reserve Bank of Australia’s latest minutes report suggesting that rates could be slashed further in the future if economic data continues to disappoint.
The RBA cut rates -25 basis points to 2.25% in February but left the benchmark rate unchanged in March. However, last night’s minutes report showed that concerns over the rate of borrowing – that it is increasing faster than incomes – mean that future rate cuts are on the cards, and this proved injurious to the ‘Aussie’ Dollar.
New Zealand Dollar
The Sterling to New Zealand Dollar exchange rate remained fairly flat yesterday. Both currencies are predicted to benefit from sturdy domestic data releases later this week, with UK unemployment set to fall and New Zealand GDP set to grow, and this meant that traders were reluctant to send GBP/NZD either higher or lower.
Data Released Today
EUR German ZEW Survey (Economic Sentiment) (MAR)
EUR Euro-Zone Consumer Price Index (YoY) (FEB F)
USD Housing Starts (MoM) (FEB)