Headlines
TV election debate not a game changer –
Despite absence of PM Cameron.
‘Grexit’ fears continue to weigh on Euro –
Finance minister Varoufakis says willing to compromise.
GBP/USD rallies 110 pips –
Weak US data undermines rate hike bets.
Canadian inflation on tap –
CPI set to print at 1%.
Sterling
The Pound remained relatively unresponsive to a five-way televised election debate last night, which strangely did not feature current Prime Minister David Cameron. The Tory leader’s decision not to show up was pounced on by those that did and labelled as political cowardice. But, with Labour leader Ed Miliband only seen to have claimed a 4-point victory over Scottish National Party (SNP) leader Nicola Sturgeon in a snap opinion poll following the debate, it does not look as though the event will prove to be a game changer.
However, volatility is expected later this morning when new UK labour market data is set to show that unemployment dipped to a fresh six-year low of 5.6% and that wages rose by around 1.8% in the three months leading up to February. If the report prints in line with market expectations then demand for the Pound could increase, but if wage growth disappoints there is potential for sharp declines.
Euro
The Euro suffered from enhanced Greek exit rumours yesterday morning as markets reacted to a story in the Financial Times claiming that the Hellenic nation had asked the IMF for an extension on the repayment of loans due in May. Although Greece denied having made the request, IMF Chief Christine Lagarde acknowledged that the author of the piece was ‘very well informed’ and stated that the IMF would not support a delayed payment. Markets were unimpressed by the issue because it was seen to increase the possibility that Greece could default on its debt.
However, Euro traders were buoyed later on in the evening when Greek finance minister Yannis Varoufakis conceded that Syriza is willing to ‘compromise, compromise, compromise’ in debt negotiation talks as long as the integrity of the Hellenic nation itself wasn’t ‘compromised’.
US Dollar
Sterling appreciated by over 100 pips against the US Dollar for the third day in a row yesterday as American data once again printed worse-than-expected.
US building permits were reported to have contracted -5.7% in March, down from +4.0% a month previously, initial jobless claims rose by 12,000 to 294,000 last week compared to predictions that they would fall to 280,000 and housing starts rose by just 2.0%, disappointing forecasts of a bumper 15.9% increase.
The dud data prints followed on from Wednesday’s damaging industrial output figures and Tuesday’s disappointing retail sales report to leave investors much less confident that the Federal Reserve is going to start tightening monetary policy this summer. It is now deemed more likely that ‘lift-off’ on Fed rates will begin in September and this shift in rate hike expectations is having a negative impact on demand for the ‘Greenback’.
Canadian Dollar
Sterling gave back its gains against the Canadian Dollar yesterday afternoon following the publication of a report from the Organisation of Petroleum Exporting Countries (OPEC) predicting that US oil production will cool sharply later on in the year. The report was seen to suggest that oversupply in the market could recede over the next six months and this propelled brent crude oil to its highest level so far in 2015. Demand for the ‘Loonie’ also increased following OPEC’s forecast.
There is potential for GBP/CAD fluctuations later this afternoon when the latest Canadian inflation and retail sales reports are released. Markets see Canadian CPI holding steady at 1.0% but anything lower than that could tempt the doves into selling the ‘Loonie’ on Bank of Canada rate cut fears.
Australian Dollar
The Pound struggled to claw back any of its Thursday morning losses against the ‘Aussie’ Dollar yesterday as traders continued to digest the surprisingly strong Australian jobs report for March. Traders were impressed by the labour market numbers, which included a 37,700 rise in job creation and a two-point drop in unemployment from 6.3% to 6.1%.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate remained around a cent above three-month lows yesterday as election jitters continued to cloud the UK economic outlook, even though last night’s televised election debate appeared to have little impact on voters’ mindsets. However, Sterling could rally against the ‘Kiwi’ later this morning if UK wage data points towards a quicker-than-anticipated rebound in UK consumer price inflation.
Data Released Today
09:30 GBP ILO Unemployment Rate (3M) (FEB)
09:30 GBP Average Weekly Earnings (3M/YoY) (FEB)
10:00 EUR Euro-Zone Consumer Price Index (YoY) (MAR F)
13:30 CAD Consumer Price Index (YoY) (MAR)
13:30 USD Consumer Price Index (YoY) (MAR)
13:30 CAD Retail Sales (MoM) (FEB)
15:00 USD U. of Michigan Confidence (APR P)