Headlines
UK manufacturing hits 8-month high
– But Sterling sentiment hurt by election jitters.
Greece releases economic reform list
– Increases sentiment in Europe.
GBP/USD flat
– US ISM hits nr-2-yr low.
Sterling at weekly highs vs. Antipodeans
– 3-week vs. AUD, 2-week vs. NZD.
Sterling
The Pound benefitted from a sturdy manufacturing report yesterday but demand for the UK tender was impacted by election jitters ahead of today’s seven-party television debate. The very fact that seven different parties have been granted the right to speak live is testament to how tight this year’s general election is likely to be. And with most political analysts predicting a hung parliament, many investors are starting to pull out of Sterling positions ahead of what could easily be a period of economic volatility whilst leaders attempt to create a ruling government.
It is a shame that political tensions muddied markets’ view of the Pound yesterday because Sterling could easily have appreciated on the back of an eight-month high manufacturing PMI score of 54.4. Markit Economics reported that sub-indexes for production volumes, new orders and consumer goods all improved in March but that input and output prices continued to fall.
Euro
The Pound to Euro exchange rate remained relatively flat on the day yesterday as traders reacted to the Greek government’s new list of economic reforms.
Although analysts were uncertain over the efficacy of the new austerity measures, which hope to raise an additional €6 billion this year, the single currency responded positively to the proposals because they should help the Hellenic nation secure short-term financing and therefore avoid defaulting on upcoming debt repayments.
Among the list of reforms were plans to obtain €875 million in tax from offshore bank accounts, €600 million from a lottery scheme aimed at encouraging consumers to demand VAT receipts and €400 million on combating illegal oil, tobacco and alcohol sales. Theoretically, these measures should help Greece achieve a robust primary surplus of 3.9% of GDP in 2015.
US Dollar
Amid a backdrop of UK general election jitters and upbeat British manufacturing output numbers the Pound managed to hold steady against the US Dollar yesterday.
Across the pond in the United States it was reported that the headline ISM manufacturing index cooled to a near-two-year low of 51.5 in February. The underwhelming ecostat marked the fifth consecutive month that American factory output has decelerated, which could weigh over the minds of Federal Reserve officials as they start to hone-in on a date to begin hiking monetary policy.
Canadian Dollar
A slight uptick in global oil prices helped stoke demand for the Canadian Dollar yesterday on a day when GBP/CAD depreciated by around -90 pips. However, it was concerns regarding the political outlook in Britain that drove the majority of Sterling’s losses against the ‘Loonie’ yesterday morning rather than the slight increase in the value of Canada’s most lucrative export.
Australian Dollar
The Pound ticked higher against the Australian Dollar yesterday afternoon as markets retained a negative outlook for the Antipodean currency in light of predictions that Australia could be on the verge of sliding into a post-mining boom recession. GBP/AUD is currently trading at a three-week high and there is every possibility that Sterling could strengthen further against the ‘Aussie’ over the next few weeks and months.
New Zealand Dollar
The Pound struck a fortnightly high against the New Zealand Dollar yesterday in reaction to the sturdy UK manufacturing PMI report. However, GBP/NZD found resistance at a significant psychological barrier and ended up giving up the majority of its early morning gains.
Data Released Today
09:30 GBP Markit/CIPS UK Construction PMI (MAR) Medium
13:30 USD Initial Jobless Claims (MAR 28) Medium
15:00 USD Factory Orders (FEB) Medium