Headlines
UK unemployment hits 7-yr low
– Job creation surges 248K .
Greece has until May 11 to agree reforms
– Merkel will ‘go a long way’ to keep Greece in Eurozone.
GBP/USD hits monthly high
– Technical analysts predict big Sterling gains.
Canadian inflation impresses
– Core CPI hits 6-yr high of 2.4%.
Sterling
Sterling received a little bit of a fillip on Friday morning when British unemployment printed at its lowest level for seven years. Matching economists’ forecasts of a -0.1% decline, the jobless rate fell to 5.6% thanks to a bumper 248,000 surge in job creation. Wage growth ticked along nicely at 1.7%, marking a 1.7% rise in real wages – as inflation is currently running at zero – but investors were slightly concerned by a downward trend developing in the monthly average earnings figures. In December wages increased by 2.4%, in January they slowed to 1.4% and in February they cooled again to 1.3%, suggesting that the recent dip in inflation has made it more difficult for workers to demand pay rises.
The Pound rallied strongly in reaction to the seven-year low unemployment figure but the UK tender was unable to hold onto its morning gains against some of its most-traded currency peers.
Euro
GBP/EUR rallied by around 80 pips on Friday morning in reaction to the declining UK jobless rate, however, the single currency recovered later on in the day as markets got wind of news that a number of high level Eurozone officials are unwilling to let Greece leave the currency union as long as the Hellenic nation agrees to implement at least some new economic reforms.
In addition to the sturdy British job creation numbers ‘Grexit’ fears had weighed on the Euro on Friday as investors digested news that Greek leaders only have until May 11th to agree a concrete set of reforms with the European Commission. But demand for the single currency was buoyed by rumours that German Chancellor Angela Merkel is prepared to ‘go a long way’ to keep Greece in the Eurozone, which investors saw as a sign that Greece’s largest creditor could be prepared to soften its approach to the debt negotiations to ensure that, at some point, Germany does receive at least some of the money that it’s owed from the Greek government.
Many analysts have speculated for months that Greek Prime Minister Alexis Tsipras and finance minister Yannis Varoufakis are aware of, and attempting to use to their advantage, the fact that Germany stands to lose a lot of a) money and b) diplomatic respect if it allows the Hellenic nation to become the first member state to leave the now 19-nation bloc. But the argument gained credence on Friday due to a report on Bloomberg news.
US Dollar
The Pound to US Dollar exchange rate rose to a monthly high on Friday morning thanks to the sanguine British labour market report. However, Sterling failed to assert itself above key psychological resistance and GBP/USD once again closed for the day below 1.50.
With American economic data beginning to cool and Federal Reserve rate hike bets being pushed back there is, according to technical trading patterns, potential for a large upswing in GBP/USD over the next few months. Some speculative investors expect ‘Cable’ to rally by as much as 800 pips over the next month as the currency pair corrects following last year’s 20-cent dip.
However, it is equally possible that May’s UK general election could prevent the Pound from launching a significant rally against the ‘Greenback’ if political uncertainty clouds the economic outlook in Britain.
Canadian Dollar
Strong domestic labour market data helped the Pound register an 80 pip gain against the Canadian Dollar on Friday even though core inflation in the North American nation printed at a six-year high of 2.4%.
Both the headline and the core CPI figures came in stronger-than-anticipated as prices were seen to have risen during March in almost every category, which seemed to corroborate the Bank of Canada’s assertion that the domestic economy will not be impacted too greatly by last year’s sharp plunge in oil prices. Strangely though, the data did not translate into lasting demand for the ‘Loonie’
Australian Dollar
The Pound opened around 100 pips lower against the ‘Aussie’ at the start of this week’s session as Asian markets reacted to stimulatory measures from the Chinese central bank. The People’s Bank of China announced that it had cut the commercial bank reserve threshold by -1.0% in order to boost liquidity by making it easier for large banks to lend to consumers, which was seen as a positive development for trade prospects between China and Australia.
New Zealand Dollar
Remarkably, the New Zealand Dollar escaped unscathed following a dismal 15-year low consumer price index print of 0.1% earlier this morning, down from 0.8% previously. Dipping oil prices contributed to the damp score, which has not been matched since 1999, but markets appeared reluctant to bet on an interest rate cut from the Reserve Bank of New Zealand following the result and this prevented the ‘Kiwi’ from suffering any severe losses.
Data Released Today
13:30 USD Chicago Fed Nat Activity Index (MAR) Medium
14:45 EUR ECB Announces Details of QE Purchases High
15:05 CAD Bank of Canada’s Poloz Speaks in New York Medium
18:00 AUD RBA Govenor Stevens Speaks in New York Medium