Sterling
The Pound increased in value over the day against most of the majors yesterday as traders responded to comments from Bank of England policymaker John Cunliffe. The BoE man noted surprise at the recent shift in rate hike expectations, which have been pushed back from early 2017 to late 2019 over the past week or so. Cunliffe said he couldn’t see ‘anything in the economic news that would lead to a shift like that’.
Although markets remained fairly steadfast in their dovish outlooks for UK interest rates demand for Sterling did pick up following the BoE remarks.
Euro
The Pound to Euro exchange rate rallied by around a cent yesterday as the European Central Bank’s latest minutes report confirmed that a perfect storm of flagging economic growth, sliding commodity prices and downbeat market sentiment was likely to persuade central bankers to loosen policy further in March.
Sterling was also boosted by BoE policymaker Cunliffe’s remarks but fears over a potential ‘Brexit’ constrained the UK currency. Later today British data is tipped to show that retail sales rebounded from a -0.9% contraction in December to expand +0.7% in January, which could send GBP/EUR higher.
US Dollar
‘Cable’ strengthened by around a third of a cent yesterday as sentiment towards Sterling warmed slightly following BoE official John Cunliffe’s comments suggesting that rates would be raised before 2019.
US data saw the Philadelphia Fed index improve, albeit from -3.5 to -2.8, and the leading indicators index print at -0.2%. The reports hampered demand for the ‘Greenback’ but we could see a shift in sentiment this afternoon if US CPI jumps from 0.7% to 1.3% as analysts anticipate. Although a March Federal Reserve rate hike is looking increasingly unlikely, a sturdy inflation score of 1.3% could help boost bets of future US rate rises in 2016.
Canadian Dollar
The Pound rebounded by around a cent from a seven-month low against the Canadian Dollar yesterday following a sharp three cent depreciation on Wednesday.
Global risk sentiment was hurt by a weaker-than-anticipated Chinese CPI print of 1.8%, which undershot forecasts of 1.9% but demand for the ‘Loonie’ remained underpinned by optimism surrounding a potential deal between the world’s largest oil producing nations to curb output in order to drive prices higher.
Australian Dollar
The Pound to Australian Dollar exchange rate grew by around 150 pips yesterday as demand for the ‘Aussie’ was hit by a surprise uptick in domestic unemployment from 5.8% to 6.0%. The risk-sensitive Antipodean currency also suffered following the cooler-than-expected Chinese inflation report because Australian exports rely heavily on Chinese buyers.
New Zealand Dollar
Sterling appreciated by around a cent against the New Zealand Dollar yesterday as less-dovish-than-anticipated BoE comments bolstered the appeal of the Pound while downbeat Chinese figures weighed on the risk-correlated ‘Kiwi’.
Data Released
09:30 GBP Retail Sales (MoM) (JAN) 0.7%
09:30 GBP Public Sector Net Borrowing (Pounds) (JAN) Medium -13.9b
13:30 USD Consumer Price Index (YoY) (JAN) High 1.3%
13:30 USD Real Avg Weekly Earnings (YoY) (JAN) Medium 1.7%
13:30 CAD Consumer Price Index (YoY) (JAN) High 1.7%