Headlines
Glitter protest halts ECB presser –
Draghi sparkles in aftermath.
ECB easing set to continue –
Dovish indicator for Euro.
GBP/USD rallies 110 pips –
US industrial production down -0.6%.
BOC leaves rates unchanged –
‘Loonie’ rallies 200 pips.
Sterling
The Pound performed fairly well against the Euro and the US Dollar yesterday as a dovish statement from the European Central Bank and a downbeat industrial production report from the States weighed over their respective currencies. However, Sterling fared less well against the Canadian Dollar after the Bank of Canada left interest rates on hold and the Pound also stuttered against the Australian Dollar due to a better-than-anticipated Antipodean jobs report .
UK general election jitters appear to have taken a backseat over the last few days but there is every chance that they will come back to haunt the Pound in the weeks ahead.
Euro
European Central Bank President Mario Draghi put in a glittering performance yesterday, which helped drive Sterling to a four-week high against the Euro.
The ECB Chairman’s speech glittered both metaphorically and literally. Literally in that the press conference was interrupted by a 21-year-old female protestor wielding a bag of glitter and a t-shirt with the words ‘END THE ECB DICK-TATORSHIP’ written on it. And metaphorically in that he managed to retain a remarkable level of calm to deliver the rest of his speech just a few minutes following the incident.
The single currency weakened by around half a cent following the eventful press conference in reaction to Draghi’s assurance that there would be more-than-enough sovereign bonds for the ECB to mop up in its recently launched quantitative easing programme, which the central banker said would last until at least September 2016 or until inflation reached the bank’s target. Draghi’s dovish remarks assuaged fears that the ECB could be considering cutting its stimulus scheme short and this boosted confidence in the region but simultaneously was taken as a bearish indicator for the Euro.
US Dollar
The Pound to US Dollar exchange rate rallied by just over a cent yesterday in reaction to another disappointing American ecostat. Following on from Tuesday’s underwhelming retail sales score it was announced that industrial production shrunk -0.6% in March – the worst score for over two years – dampening hopes that sturdy growth could bring about an imminent rise in interest rates.
The dud industrial output score was twice as bad as the -0.3% figure predicted by markets beforehand and much worse than February’s minor uptick of +0.1%. The report showed that plummeting oil and gas investment, as a consequence of the collapse in oil prices, contributed to the contraction, as did the relative strength of the ‘Greenback’, which made US industrial products more expensive to foreign buyers.
In light of the downbeat US data of the last few days markets are currently pricing in the Federal Reserve’s first rate hike in September – three months later than previous projections of June – and this is having a negative impact on the US Dollar.
Canadian Dollar
Sterling appreciated against the ‘Loonie’ in the build-up to yesterday’s Bank of Canada policy announcement. However, demand for the Canadian Dollar returned when BOC Governor Stephen Poloz announced that interest rates would remain at 0.75% through April.
Despite warnings from analysts that the recent -50% slide in crude oil prices will continue to hit the Canadian economy hard, Poloz insisted that weak growth in the first quarter, which he described rather innocently as a ‘wobble’, will be reversed when investment rebounds midway through the year. Although not all market participants were convinced by Poloz’ optimism, the statement was enough to lift the Canadian Dollar by around two cents to a near-three-month-high against the Pound.
Australian Dollar
A bumper 37,700 surge in job creation helped drive the Australian unemployment rate lower from 6.3% to 6.1% yesterday, smashing economists’ forecasts of the rate remaining static. And the impressive report, which featured a 31,500 increase in full-time positions, helped the ‘Aussie’ Dollar register a near-three-cent gain against the Pound. The Australian Dollar was also boosted by the downbeat US industrial output report because it was seen to push back Fed rate hike expectations.
New Zealand Dollar
Sterling traded lower against the New Zealand Dollar yesterday as soft American data played into the hands of the risk-sensitive ‘Kiwi’ and upbeat Australian jobs numbers bolstered economic sentiment in the region.
Data Released Today
13:30 USD Building Permits (MoM) (MAR) Medium
13:30 USD Housing Starts (MoM) (MAR) Medium
13:30 USD Initial Jobless Claims (APR 11) Medium