Sterling
The Pound remained weak against the majors yesterday as Sterling sentiment stayed soft following the revelation that influential London Mayor Boris Johnson would be supporting the ‘Brexit’ campaign.
Bank of England Governor Mark Carney did little to boost the Pound when he said that the outlook for interest rates was balanced between rises and reductions, having previously stated that the next move would be up. However, the central banker was keen to quash rumours that rates could go into negative territory.
Euro
The Pound to Euro exchange rate ticked lower by around a third of a cent yesterday as demand for Sterling remained extremely weak despite data showing that German business confidence slowed to a one-year low this month.
The German IFO index fell at its fastest rate for over four years from 107.3 to 105.7 as emerging market melees and ‘Brexit’ concerns weighed on the minds of German business leaders. But GBP/EUR failed to capitalise as traders continued to focus on the EU referendum in June.
During the afternoon it was reported that the London Stock Exchange (LSE) was in talks to merge with Germany’s Deutsche Börse. The proposed takeover would create a stronger growth outlook for both exchanges and, although there are doubts due to past failed attempts to merge, the Pound and the Euro both saw a slight uptick in demand following the announcement.
US Dollar
‘Cable’ depreciated by over a cent yesterday and Sterling struck a new a seven-year low against the US Dollar as ‘Brexit’ fears weighed.
The Pound started badly and things got even worse during the afternoon when GBP/USD tumbled even though a key gauge of US consumer confidence came in much lower than analysts had anticipated.
The confidence index dropped from 97.8 to 92.2, confounding expectations of 97.0 but the ‘Greenback’ avoided any losses. However, the downbeat data was seen as a concern because with gasoline prices so low, common sense would suggest that American consumers would have more spare cash in their wallets to spend on other items of interest.
Canadian Dollar
After suffering a stupendous day of losses on Monday the Pound failed to recover against the Canadian Dollar yesterday.
GBP/CAD shed five cents on Monday and Sterling remains five cents down so far this week. The Pound did rally by around 150 pips at one point due to a statement from the Saudi Oil Minister Ali Al-Naimi suggesting that although production had been frozen it was not likely to be cut. However, these gains evaporated in the last hour of the London session as jittery traders pulled out of UK investments.
Australian Dollar
The Pound weakened by another cent yesterday to strike a fresh nine-month low versus the Australian Dollar as talk of a Sterling crisis escalated ahead of the EU referendum vote. The commodity-correlated ‘Aussie’ also benefitted from a rise in value of its most traded export: iron ore prices rallied above US$50 a tonne for the first time since October as Chinese building firms stocked up following the Lunar New Year.
New Zealand Dollar
The Sterling to New Zealand Dollar exchange rate remained close to a nine-month low yesterday as traders refused to buy the dip after GBP/NZD’s six cent depreciation on Monday. With ‘Brexit’ fears dominating sentiment it seems even the profit takers were afraid to get involved on this occasion.
Data Released
11:00 GBP CBI Reported Sales (FEB) Medium 12
14:45 USD Markit US Services PMI (FEB P) Medium 53.5