Headlines
UK growth revised higher –
Upbeat construction output print.
‘Grexit’ fears weigh on Euro –
EU discuss possibility of default.
‘Cable’ rallies 50 pips –
Despite upbeat US consumer print.
GBP/AUD hits fresh 71-month high –
GBP/NZD at new 4-year high.
Sterling
The Pound put in a decent performance on Friday, rallying versus most of the majors as sanguine construction data boosted UK growth prospects. On a yearly basis construction output was reported to have increased 1.5% in April, which was three times as high as the median market consensus of 0.5%. Positive revisions to past data showed that the construction industry expanded by an impressive 5.0% in March, which the Office for National Statistics (ONS) cited as reason to believe that Britain actually grew by 0.4% in the first quarter, rather than the current estimate of 0.3%. And to top things off, the ONS also declared that it had miscalculated last year’s GDP data and it is now believed that the British economy grew by 2.9% rather than 2.8% in 2014.
The only negative point for the Pound was Standard & Poors’ decision to put Britain’s AAA credit rating on negative outlook. The agency cited the upcoming EU referendum as evidence that ‘economic policymaking could be more exposed to party politics than expected’.
Euro
Sterling struck a 10-day high against the single currency on Friday due to widespread concern over Greece’s position within the 19-nation bloc.
Following the IMF’s decision to withdraw staff from debt negotiations with Greece, the EU began formal discussions on how to deal with a potential Greek exit for the first time. Although ‘Grexit’ discussions were ‘very theoretical’ they carried a certain symbolism, which was seen to augur badly for the Hellenic nation and, by extension, the Euro currency. Rumours also circulated that German Chancellor Angela Merkel had finally given up on Greece and was resigned to the fact that the Hellenic nation is going to leave the Eurozone.
Despite this clear downturn in sentiment towards Greece, one official from Athens stated that the government was ‘closer than ever to a deal’. Make of that what you will.
US Dollar
Despite data showing that US consumer confidence jumped from 90.7 to 94.6 in June, beating forecasts of 91.4, the Pound to US Dollar exchange rate rallied by around half a cent on Friday afternoon.
US economic sentiment was boosted by the upbeat consumer confidence figures, which featured the highest personal finance prospects print since 2007; wage gain expectations were the highest since 2008. However, the report was not enough to stop the Pound being propelled higher against the ‘Greenback’ as ‘Cable’ surged through a notable resistance level.
The main thing to keep an eye out for this week, regarding the US Dollar, is Wednesday’s interest rate decision from the Federal Reserve. Markets are fairly certain that the Fed won’t opt to tighten rates this time out but the accompanying press conference could contain hints as to when they do intend to start tightening monetary policy.
Canadian Dollar
The commodity-sensitive Canadian Dollar suffered on Friday as Saudi Arabia indicated that it could start increasing oil output. The Saudi comments sent crude oil spiralling lower and this in turn reduced the appeal of the ‘Loonie’.
The only significant economic release related to the Canadian Dollar this week is predicted to show that Canadian consumer prices remained steady during May with an inflation rate of 0.8%.
Australian Dollar
The Pound to Australian Dollar exchange rate sprung to its highest level in 71 months on Friday as traders sent Sterling higher following the updated UK GDP data. The high-beta ‘Aussie’ was also hurt by speculation that this week’s Reserve Bank of Australia minutes report will show that central bank officials are veering towards another reduction in rates over the next few months.
However, the ‘Aussie’ recovered by around half a cent when markets reopened for this week’s session.
New Zealand Dollar
The embattled New Zealand Dollar succumbed to another -100 pip depreciation against the Pound on Friday as markets continued to offload the ‘Kiwi’ currency following the surprise -25 basis point rate cut from the Reserve Bank of New Zealand last week. GBP/NZD currently stands at its highest level since March 2011.
Data Released Today
13:15 USD Industrial Production (MAY) Medium 0.2%
13:15 USD Manufacturing (SIC) Production (MAY) Medium 0.3%