Headlines
BRC retail report boosts Pound
– 0.0% CPI on tap.
Pound up vs. Euro
– Greek exit rumours proliferate.
GBP/USD hits 5-yr low
– US retail sales set to jump 1%.
Commodity currencies decline
– Due to dud Chinese export report.
Sterling
An upbeat British Retail Consortium (BRC) report helped prompt a bout of profit taking yesterday as markets looked to take advantage of the sharp depreciation in Sterling last week.
The BRC reported that retail spending rose 4.7% in March – its fastest annual pace for almost a year – reflecting the recent dip in consumer prices, the onset of sturdier wage growth and the early Easter Holiday period. But it will take more than rising consumer spending trends to lift the Pound significantly; the threat of next month’s general election leading to political instability is weighing over the UK like a set of particularly grim storm clouds.
And the Pound could come under more selling pressure this morning if the latest UK inflation report prints below the median market consensus of 0.0%.
Euro
Sterling rallied by around 70 pips against the Euro yesterday as Greek exit fears escalated in response to speculation that the Hellenic nation could be planning to hold early elections. The rumour, which was rebutted by Greek officials, originated in the German tabloid newspaper Bild and as such should not have been given the credence that it was. But with relations so frayed between Greece and its creditors at the moment, markets are especially sensitive to ‘news’ related to the economic outlook in the Mediterranean nation.
A characteristically more considered report in the Financial Times did little to bolster Euro sentiment because it flagged that Greece could be heading for a debt default if it does not secure a credit agreement by the end of the month.
US Dollar
Sterling struck a fresh five-year low against the US Dollar yesterday morning but ‘Cable’ recovered by around half a cent later on in the day as profit taking stances supported the Pound.
But with British inflation predicted to print at a joint-record low of 0.0% tomorrow and US retail sales set to come in robustly at 1.0% the outlook for GBP/USD does not look great today. The fact that UK CPI could easily underwhelm market expectations and dip into disinflationary territory merely compounds the risk of Sterling depreciating.
Canadian Dollar
A rare 1.2% rise in crude oil prices was not enough to support the Canadian Dollar yesterday as investors’ appetite for risk was dampened by bad news out of the world’s second-largest economy. The Chinese Customs Administration reported that exports plunged -15% in March, which prompted analysts at the World Bank to predict that Chinese growth could slow from last year’s 25-year low of 7.4% to a new multi-decade trough of 7.1% in 2015.
Australian Dollar
The Pound to Australian Dollar exchange rate strengthened by just under two cents in the early hours of yesterday morning in reaction to the risk-damaging Chinese trade data, which investors saw to bode ill for future synergetic growth between the two nations. Bets that the Reserve Bank of Australia could look to cut interest rates further down the line in reaction to the slowdown in China proliferated following the dud Chinese trade figures.
New Zealand Dollar
The New Zealand Dollar followed the rest of the commodity bloc lower against the Pound yesterday due to the downbeat data out of China. And if the Chinese dragon starts firing blanks there is every chance that the ‘Kiwi’ could come under further pressure over the next few months.
Data Released Today
GBP Consumer Price Index (YoY) (MAR)
EUR Euro-Zone Industrial Production w.d.a. (YoY) (FEB)
USD Advance Retail Sales (MAR)