Sterling
On Friday a report from the Office for National Statistics (ONS) showed that the retail sector cooled at the end of the year but sentiment towards the Pound was boosted by some better-than-anticipated public finances data.
The retail sales report pointed to a slowdown in consumption growth from 3.5% to 2.1% in December as the unseasonably warm weather weighed on clothing sales and fierce price cuts took a chunk out of the consumer spend total.
However, Sterling benefitted from a surprise dip in public sector borrowing as 2015’s December deficit printed at £7.5 billion, down from £11.7 billion in 2014. Due to the January deadline for self-assessment tax returns, there is a good chance that this month’s figures will also impress.
Euro
The Pound to Euro exchange rate rallied by around a cent on Friday as European private sector data disappointed and European Central Bank President Mario Draghi confirmed that his team of policymakers has the ‘determination, the willingness and the capacity’ to act and deploy additional stimulus measures.
Speculation that the ECB could loosen policy further spiked on Thursday when Draghi opened the door to new measures and continued on Friday following a markedly dovish speech from the ECB Chief at the World Economic Forum in Davos. Stimulus hopes were also bolstered by news that Bundesbank President, and notorious hawk, Jens Weidmann would not be voting at the next policy meeting in March.
The single currency was also impacted by reports showing that manufacturing and service sector growth slowed at the beginning of the year, which brought the composite PMI index down from 54.3 to 53.5 in January.
US Dollar
‘Cable’ appreciated by around half a cent on Friday as better-than-hoped UK public borrowing figures bolstered the appeal of the Pound.
It is also possible that Storm Jonas, the blizzard that wreaked havoc across the East Coast of America over the weekend, could have depressed demand for the ‘Greenback’ as investors hedged against a dip in economic output.
Data in the US on Friday showed that manufacturing output rose at a pace of 52.7 in January, up from 51.2 in December, but that the index of leading indicators fell from +0.4% to -0.2% in December.
Canadian Dollar
Sterling sunk to a 50-day low against the ‘Loonie’ on Friday as ECB stimulus hopes boosted risk sentiment and helped push crude oil prices higher by around 9%. Demand for oil was also heightened by the blizzard, which investors bet would increase oil consumption in the near term.
Domestically, it was a mixed bag for the Canadian Dollar. Retail sales rose 1.7%, smashing expectations of 0.2%, but consumer prices cooled -0.4% on a monthly basis, which meant that the headline inflation rate came in at 1.6% compared to forecasts of 1.7%.
Australian Dollar
The Pound to Australian Dollar exchange rate struck a fresh fortnightly low on Friday but this triggered a set of profit taking trades and subsequently GBP/AUD managed to strengthen by around half a cent by the end of the day. Future direction for the pair will largely depend on risk trends as traders struggle to come to terms with the latest leg of the commodity crash and the scarcity of returns on traditional investments.
New Zealand Dollar
The Pound followed a similar trajectory against the New Zealand Dollar as it did against the ‘Aussie’ Dollar on Friday and subsequently GBP/NZD managed to rack up around 180 pips worth of gains.
09:00 EUR German IFO – Business Climate (JAN) Medium 108.7