Sterling
Investors took a day off from selling the Pound on ‘Brexit’ concerns on Friday, allowing Sterling to rack up gains against some of its most traded currency peers.
UK data showed that construction output shrunk -0.8% in January, which marked a steady improvement on economists’ forecasts of -1.7%. The trade balance also came in slightly better-than-anticipated, falling from -£10.5 billion to -£10.3 billion. However, optimism was curtailed by the details of the report, which showed that imports rose 1.1% in January as compared to the fourth quarter while exports tumbled -1.1%.
Euro
The Pound to Euro exchange rate rallied by around a cent on Friday as investors re-evaluated the European Central Bank’s latest stimulus measures.
ECB President Mario Draghi announced a series of rate cuts and additional quantitative easing measures on Thursday but although the policy decision was far more striking than analysts had expected the single currency strengthened due to Draghi’s admission that interest rates would probably not be reduced again.
The Euro’s rollercoaster ride continued with a big dip on Friday as investors appeared to accept that, even without further rate cuts, Thursday’s package would likely have a significant impact on the Eurozone economy and help to reduce the yield on European debt.
The single currency’s fall was exacerbated by an opinion piece / blog on the ECB website from Vice President Vitor Constancio suggesting that other forms of stimulus were possible in the future (such as higher monthly asset purchases) even though negative deposit rates may have reached their limit.
US Dollar
Sterling strengthened by around a cent to strike a near-monthly high against the US Dollar on Friday as the ‘Brexit’ related selloff took a breather.
Since hitting a seven-year low at the end of February GBP/USD has staged a remarkable recovery by registering around five cents worth of gains. For Sterling to continue bouncing higher we will have to see a positive statement from the Bank of England later on in the week. The UK central bank is unlikely to alter its interest rate on Thursday but any dovish statements could potentially put pressure on the Pound.
Canadian Dollar
Sterling appreciated versus the Canadian Dollar on Friday afternoon when data from North America showed that Canadian unemployment rose unexpectedly last month. February’s jobless figure rose from 7.2% to 7.3% as the Canadian economy shed -2,300 jobs. The ‘Loonie’ may have lost more ground to the Pound had it not been for a statement from the International Energy Agency suggesting that oil prices may have bottomed out earlier in the year.
Australian Dollar
The Pound to Australian Dollar exchange rate lost out on around -150 pips on Friday as risk sentiment increased on hopes of higher oil prices and stronger growth in Europe courtesy of the ECB’s latest stimulus package. The ‘Aussie’ has found a purple patch of form on FX markets recently and traders have taken out 23,000 positive AUD positions in the last four weeks to take advantage of the currency’s comparable high yields.
New Zealand Dollar
The New Zealand Dollar clawed back some losses against the Pound on Friday. Following a stonking five cent depreciation in response to a surprise rate cut from the Reserve Bank of New Zealand the ‘Kiwi’ steadied itself and inched higher by around 75 pips during Friday’s session.
Data Released
10:00 EUR Euro-Zone Industrial Production w.d.a. (YoY) (JAN) Medium 1.6%