Headlines
Election debate yields no winner –
UK construction slows, but confidence soars.
Pound loses out to Euro –
Despite little progress in Greece.
GBP/USD rallies 100 pips –
On seriously soft US NFP report.
Sterling loses out to ‘Kiwi’ –
Remains flat vs. CAD & AUD.
Sterling
Investors retained a cautious approach to the Pound at the end of last week’s session as UK construction output printed lower-than-anticipated and the jury remained out as to which political leader came out on top during last week’s unprecedented seven-party television debate. May’s general election is tipped to be one of the closest on record and fears of political instability were not assuaged by the debate, which failed to give either party a clear lead; four snap opinion polls showed four different winners from the event.
In more concrete news (excuse the pun) British construction output cooled from 60.1 to 57.8 due to a slowdown in job creation and also due to jitters ahead of the general election. But Sterling was not subject to any intense selling pressures following the report because confidence that the industry will grow over the next 12 months rose to a nine-year high.
Euro
Sterling lost out on over -150 pips against the Euro towards the tail-end of last week’s session as markets got their teeth stuck into a surprisingly interesting American labour market report. The worse-than-anticipated US jobs data created shockwaves through the financial system as traders began to re-adjust their projections for when the Federal Reserve will start tightening monetary policy.
The single currency’s performance against the Pound were also boosted by British election jitters, which could continue to weigh over the UK currency through April, and indeed into May if there is a delay in the creation of a new government. Over in Greece relations remained fraught between the ruling Syriza government and the Hellenic nation’s European creditors. Greek finance minister Yannis Varoufakis condemned the EU for leaking Greece’s latest reform plan to the press and Bundesbank boss Jens Weidmann warned that ‘time is running out for Greece’ to agree measures to obtain further funding.
US Dollar
The US Dollar plunged lower across the board last Friday in reaction to a stupendously bad US non-farm payroll report. Markets were anticipating a sturdy score of around 250,000 but were actually treated to a hugely disappointing print of 126,000 – basically half the median market consensus. ‘Cable’ rallied by 100 pips in the hour immediately after the NFP report was released but Sterling was unable to break above a key psychological resistance level. However, with most Western market participants absent from their desks last Friday – more likely spreading butter on hot cross buns or dressing up as bunny rabbits to entertain their children – there is every chance that we could see the ‘Greenback’ depreciate further at the start of this week’s session.
The US unemployment rate remained at a six-year low of 5.5% and wage growth ticked along nicely at a rate of 2.1% but analysts were alarmed by the below-trend monthly jobs numbers and this could drive GBP/USD higher over the next few days.
Canadian Dollar
Sterling weakened against the Canadian Dollar on Friday afternoon in a knee-jerk response to the downbeat US non-farm payrolls report, which was seen to boost risk sentiment by possibly delaying the Federal Reserve’s plans to start raising interest rates. However, the impact proved shortlived and GBP/CAD recovered by the end of the day. Now this does not rule out the possibility of the ‘Loonie’ strengthening again in the near term because analysts are anticipating a flurry of foreign exchange activity when traders return from the Easter break.
Australian Dollar
The Pound to Australian Dollar exchange rated suffered a sharp depreciation of over 150 pips on Friday afternoon when the underwhelming US labour market figures were released. However, with dark economic clouds beginning to form over the Antipodean nation, traders were reluctant to invest too heavily in the ‘Aussie’ and Sterling clawed back all of its earlier losses.
New Zealand Dollar
Just like it did against the other major commodity currencies, Sterling declined against the New Zealand Dollar on Friday thanks to the soft US NFP report. The Pound did not manage to rally back against the high-beta ‘Kiwi’ Dollar as it did against the ‘Loonie’ and ‘Aussie’.
Data Released Today
09:30 GBP Markit/CIPS UK Services PMI (MAR) Medium