Headlines
BoE’s Forbes says rate cut possible
– Sterling strength a concern.
GBP/EUR down half a cent
– 7 cents weaker over past 2 weeks.
GBP/USD rallies slightly
– US durable goods orders disappoint.
‘Aussie’ & ‘Kiwi’ fall from 2-month highs
– Profit taking kicks in.
Sterling
Talk of an interest rate cut from the Bank of England gained more traction yesterday due to comments from bank official Kritsin Forbes on the path of inflation. The BoE’s newest policymaker said that there is a ‘good chance’ that inflation will sink below zero percent over the next few months and warned that interest rates could be slashed further if Sterling’s strength against the Euro continues to weigh on the consumer price index.
The Pound didn’t respond with great sensitivity to the remarks, as they merely mirrored those made by Ms. Forbes’ colleague, BoE chief economist Andy Haldane, last week. Despite the spate of rate cut remarks over the past seven days, which were probably aimed at weakening the Pound to boost inflation rather than to be taken as a shift in the bank’s outlook, markets still anticipate that the BoE will start raising rates in the first quarter of next year.
Euro
The Pound to Euro exchange rate tumbled by around half a cent to a new monthly low yesterday as concerns over the Bank of England’s interest rate outlook helped the single currency recover from the seven-year high that GBP/EUR struck on March 11. Sterling has now fallen by around seven cents in the last two weeks, but still stands seven cents higher than it was at the start of 2015.
Data out of Germany yesterday showed that business confidence rose from 106.8 to 107.9 this month, beating the median market consensus of 107.3, as the weaker Euro and the slide in oil prices helped to improve sentiment in the region’s largest economy.
Over in Greece citizens celebrated 194 years of Hellenic independence with a military parade through the streets of Athens, whilst government officials continued to fret over the country’s fraught finances.
US Dollar
Sterling rallied marginally against the US Dollar yesterday in reaction to a downbeat US durable goods report. The data showed that sales of long-lasting consumer goods declined -1.4% in February, which extended a run of six months without positive growth in the sector – the worst performing period of durable goods sales since the middle of the financial crisis in 2009.
The Pound’s gains could have been greater had it not been for the dovish remarks of BoE policymaker Kristin Forbes on the possibility that rates could actually be slashed rather than raised in the near term.
Canadian Dollar
The Pound recovered some ground against the Canadian Dollar yesterday as markets looked to lock in profit following Sterling’s steep -120 pip losses against the ‘Loonie’ on Tuesday.
The main event on the economic calendar today, in terms of GBP/CAD movement, is likely to be this afternoon’s speech from Bank of Canada Governor Stephen Poloz in London. If Mr Poloz opts to talk down expectations of a further downward slide in Canadian interest rates then the Canadian Dollar could garner support from speculative traders.
Australian Dollar
Sterling appreciated by around 130 pips against the Australian Dollar yesterday as GBP/AUD rose from Tuesday’s two-month low. And the Pound could gain more ground against the ‘Aussie’ today if this morning’s UK retail sales report prints at 0.4%, as expected, up from -0.7% previously.
New Zealand Dollar
GBP/NZD grew by around a cent yesterday as investors took advantage of the lowest Pound to New Zealand Dollar exchange rate for two months. The ‘Kiwi’ was also impacted by data showing that the nation’s trade surplus only rose by NZ$50 million in February, compared to calls for a rise of seven times that much (NZ$350 million).
Data Released Today
09:30 GBP Retail Sales (MoM) (FEB) Medium
13:30 CAD Governor Stephen Poloz to Speak Medium