Sterling
Sterling lost ground against some of the majors on Friday as investors reacted negatively to a report indicating that Britons were growing discontented with the European Union.
YouGov’s latest poll showed that 45% of Britons surveyed would vote to leave the EU, compared to just 36% who would vote to stay in and 19% who said they did not know or would not vote. This gave the ‘NO’ camp a nine-point lead, which is the largest deficit since the wording of the referendum was announced last September.
The negative EU sentiment hurt the Pound because analysts reckon a ‘Brexit’ could seriously weaken the UK economy in the short term. Indeed, Citigroup released a report on Friday suggesting that British GDP could be reduced by -4% and Sterling could depreciate by around -15-20% in the case of a British exit from the EU.
Sterling
Sterling lost ground against some of the majors on Friday as investors reacted negatively to a report indicating that Britons were growing discontented with the European Union.
YouGov’s latest poll showed that 45% of Britons surveyed would vote to leave the EU, compared to just 36% who would vote to stay in and 19% who said they did not know or would not vote. This gave the ‘NO’ camp a nine-point lead, which is the largest deficit since the wording of the referendum was announced last September.
The negative EU sentiment hurt the Pound because analysts reckon a ‘Brexit’ could seriously weaken the UK economy in the short term. Indeed, Citigroup released a report on Friday suggesting that British GDP could be reduced by -4% and Sterling could depreciate by around -15-20% in the case of a British exit from the EU.
Euro
Data on Friday morning showed that German factory orders shrunk by more-than-expected during December but the single currency managed to inch higher against the Pound due to enhanced concerns surrounding Britain’s membership of the European Union.
The German manufacturing print pointed to a -2.7% decline in output, which was worse than the median market forecast of -1.4%. However, GBP/EUR remained fairly flat on the day as ‘Brexit’ fears weighed on demand for Sterling.
US Dollar
It was a big day for the US Dollar on Friday because investors were treated to another dose of non-farm payrolls data.
The latest American jobs report showed that 151,000 new jobs were created in January, which was less than analysts’ estimates of 190,000 and significantly less than December’s robust score of 262,000. Taken alone the NFP number was a decidedly dovish signal, however, other elements of the report were slightly more encouraging, if not confusing, and this allowed the ‘Greenback’ to strengthen against most of the majors.
Hopes of further rate hikes from the Federal Reserve this year were boosted by an unexpected dip in the unemployment rate to a new eight-year low of 4.9% and a surprisingly sharp increase in average hourly earnings, from 2.2% to 2.5%.
The upbeat unemployment rate and wage growth figures helped bring GBP/USD down by around -80 pips from a previous monthly high.
Canadian Dollar
Sterling strengthened by around a cent against the Canadian Dollar on Friday as risk sentiment sank on the mixed bag of US labour data, which most saw as indicative of future 2016 rate hikes from the Fed.
The risk-sensitive ‘Loonie’ was also damaged by a labour report of its own, which signalled that the Canadian jobless rate ticked higher unexpectedly from 7.1% to 7.2% last month.
Australian Dollar
The Pound to Australian Dollar exchange rate rallied by over 250 pips on Friday as investors’ appetite for risk was dealt a blow by the confusingly ambiguous US labour data.
With markets unsure of whether or not the Fed will opt to raise rates in 2016 the surprise dip in unemployment and unexpected acceleration in wage growth was seen as a step towards tighter policy, even though the headline non-farm payroll print came in 39,000 lower than traders had anticipated. This uptick in Fed rate hike bets weakened risk sentiment and weighed on the high-beta ‘Aussie’ Dollar.
New Zealand Dollar
The risk-correlated New Zealand Dollar followed a similar path to its Antipodean cousin the ‘Aussie’ on Friday, plunging -250 pips as global risk aversion trends weighed on the commodity-correlated ‘Kiwi’.
Data Released
09:30 EUR Euro-Zone Sentix Investor Confidence (FEB) Medium 7
13:30 CAD Building Permits (MoM) (DEC) Medium 5.6%