Headlines
Pound surges on BoE minutes –
Policymakers hint at early rate hike.
Sterling rallies 100 pips vs. Euro –
Euro consumer confidence declines.
GBP/USD breaks resistance –
Pound closes above 1.50.
Pound up vs. ‘Loonie’ –
Strong day of Sterling gains.
Sterling
Sterling rallied across the board yesterday as markets reacted to a surprisingly upbeat minutes report from the Bank of England. Two policymakers intimated that they could vote for a rise in interest rates in the near future, whilst others mentioned that inflation could pick up faster-than-expected over the next few quarters, as downward factors such as the appreciation in Sterling and the plunge in oil prices start to fade.
But what really got demand for the Pound going was a line in the statement claiming that market expectations for interest rates were ‘exceptionally slow’, which was seen as a hint that rates could be raised sooner-than-currently-anticipated.
Euro
The Pound strengthened by over a cent against the Euro yesterday to reach a fresh monthly high thanks to the Bank of England’s more-hawkish-than-expected policy statement.
With Greek debt concerns weighing heavily over the single currency, demand for the Euro was sparse yesterday. And sentiment towards the common currency drifted lower during the afternoon when the European Commission (EC) announced that consumer confidence tumbled from -3.7 to -4.6 in April. Markets had anticipated a minor uptick in the economic indicator to -2.5 but it is unlikely that such a figure would have had a positive impact on the embattled Euro.
US Dollar
HIP HIP HOORAY! Three cheers for Sterling.
Like a triumphant teenager who finally managed to pass their driving test after five failed attempts, the Pound managed to settle above key psychological resistance at 1.50 against the US Dollar yesterday.
Sterling raced to a 120 pip gain against the ‘Greenback’ as markets priced in the possibility of a sooner-than-expected BoE rate hike on the back of yesterday morning’s positive minutes report. And now that ‘Cable’ has asserted itself above an important resistance level there is potential for further Sterling gains.
Some analysts, citing technical indicators, expect GBP/USD to appreciate by around five cents over the next few months but there is a fairly high chance that British election dramas could dampen demand for the Pound around the time of next month’s vote.
Canadian Dollar
The Pound to Canadian Dollar exchange rate jumped to a weekly high yesterday after Sterling rallied over 100 pips following the Bank of England’s encouraging policy report, which many analysts saw as a precursor to more hawkish monetary commentary. Markets still expect the BoE to wait until 2016 to raise rates, but talk of UK inflation rebounding and European demand for British exports increasing was seen as a positive development for UK rate hike bets and, therefore, the Pound.
Australian Dollar
The Australian Dollar strengthened by around two cents against the Pound during yesterday’s Asian session thanks to a bumper 2.3% increase in underling Australian inflation trends. However, Sterling recovered during the London session as investors reacted positively to the Bank of England’s latest minutes report.
Australian CPI printed at 1.3%, as expected, but traders were more interested in the core inflation score, which impressed at 2.3%. The data leaves the door open to a May rate cut from the Reserve Bank of Australia but it makes it significantly less likely.
New Zealand Dollar
Sterling surged higher by two cents against the New Zealand Dollar yesterday as market sentiment towards the UK currency increased drastically following the morning’s surprisingly upbeat BoE minutes report. With New Zealand inflation printing negatively at -0.3% earlier this week the outlook for the ‘Kiwi’ against the Pound looks decidedly worse than it did just seven days ago.
Data Released Today
09:00 EUR Markit Eurozone Manufacturing PMI (APR P) Medium
09:00 EUR Markit Eurozone Services PMI (APR P) Medium
09:30 GBP Retail Sales (MoM) (MAR) Medium
14:45 USD Markit US Manufacturing PMI (APR P) Medium