Sterling
On Friday it was reported that Britons are more concerned about the European Union than at any point in the past 13 years, which is not surprising really given that we are just three-and-a-half months away from an historic referendum. Demand for Sterling has fallen since the UK Prime Minister announced that the vote on whether to stay or leave the European Union would take place on June 23. However, the Pound managed to claw back some of its losses last week as profit-taking stances drove Sterling higher.
With little fresh domestic data to contend with on Friday the Pound was left at the mercy of ‘Brexit’ bets and foreign economic developments.
Euro
The Pound to Euro exchange rate remained fairly flat on the day on Friday, tumbling half a cent in the morning before fighting back during the afternoon.
PMI data showed that performance in the Eurozone retail sector bounced back from a contraction of 48.9 in January to register a positive print of 50.1 in February and German construction output jumped from 57.9 to 59.6.
The week ahead is unlikely to see the single currency outperform versus the Pound because investors are wary that the European Central Bank is considering ways to boost the European economy. Markets anticipate further stimulus, which means that GBP/EUR should strengthen in the run-up to the ECB meeting. Following the announcement it will be interesting to see whether trader buy or sell the Euro: if investors deem the ECB’s action as significant the single currency is liable to weaken, if analysts are not impressed with the new measures then the Euro is likely to recover.
US Dollar
The big event on Friday was the US non-farm payroll report for February, which smashed economists’ forecasts of 193,000 with a bumper score of 242,000.
The robust print assuaged fears that the world’s largest economy is cooling and had not been ready for the Federal Reserve’s landmark interest rate hike last December. However, demand for the ‘Greenback’ remained constrained following the report because weak wage growth was interpreted as reason enough to expect the central bank to remain on the sidelines over the next few months.
Average earnings slowed unexpectedly from 2.5% to 2.2%, which saw markets reduce their bets of a rate hike in March from 8% to 6%. Accordingly, traders now give it a 52% chance of rates being raised in September of this year.
The Pound appreciated by around half a cent against the US Dollar following the report.
Canadian Dollar
The Pound weakened by over half a cent against the Canadian Dollar on Friday as traders bet that the weak US wage data would prevent the Federal Reserve from raising rates over the next few months. The ‘Loonie’ also benefitted from increased bets that Bank of Canada policymakers would vote to leave rates on hold at this week’s meeting.
Australian Dollar
The Pound to Australian Dollar exchange rate tumbled by over -150 pips on Friday to strike a fresh 10-month low as sliding US rate hike bets breathed life into perceived riskier assets such as the ‘Aussie’. The Australian Dollar also drew a little bit of support from a report showing that domestic retail sales rebounded 0.3% in January after stagnating in December.
New Zealand Dollar
Sterling declined against the New Zealand Dollar by over one-and-a-half cents on Friday as investors’ appetite for risk increased on the downbeat US earnings figures.
Data Released
09:30 EUR Euro-Zone Sentix Investor Confidence (MAR) Medium 6