Sterling
As European traders took a pause for the Easter Break the hunt for yield continued in global markets. The absence of European market players meant that trade volumes were thin, which in turn led to exaggerated fluctuations as each trade moved the market more than it usually would.
There were no key European ecostats released on Easter Monday and there are none due for release today either. The first key European report on the calendar this week is the German consumer price index, which is released on Wednesday afternoon. For the first British print, Sterling traders will have to wait until Thursday morning when UK consumer credit, mortgage approvals and Q4 GDP data is due for release.
Euro
Despite trading desks being closed in both Britain and the Eurozone the Pound to Euro exchange rate rallied by around 70 pips yesterday to strike a weekly high.
It stands to reason that, without any fresh ecostats or significant statements from central bankers, the Pound’s gains were a consequence of cross flows from other currency pairs. Sterling racked up sturdy gains against the US Dollar yesterday and it appears that these gains bolstered UK sentiment and propelled the Pound higher across the board.
But ‘Brexit’ fears continue to plague the Pound and subsequently analysts anticipate a period of weakness in the run up to the EU referendum in just under three months time.
US Dollar
Sterling ripped higher against the US Dollar by around 130 pips yesterday in response to an unexpected decline in monthly US price pressures.
The personal consumption expenditure index, which is considered the primary gauge of US inflation, fell -0.1% month-on-month in February, down from +0.1% in January. The disappointing result hurt Federal Reserve rate hike hopes, which had been stoked by hawkish comments from Fed policymakers during last week’s session.
The Pound raced ahead against the ‘Greenback’ in thin holiday trade as Fed rate hike bets deteriorated. Investors are now concerned that Fed Chairwoman Janet Yellen will put more pressure on the US Dollar when she speaks later this afternoon. However, if Yellen strikes a hawkish tone then we could easily see GBP/USD resume its recent downtrend.
Canadian Dollar
The Pound managed to rack up a half-cent gain against the Canadian Dollar yesterday as demand for Sterling was buoyed by the bounce in GBP/USD.
There are no ecostats on the calendar related to Canada until Thursday afternoon when January’s GDP figures are due. The North American economy grew at a monthly pace of 0.2% and a yearly pace of 0.5% in December so it will be interesting to se whether Canada was able to maintain that kind of momentum; anything less could push the ‘Loonie’ lower.
Australian Dollar
Sterling rallied by around 70 pips against the Australian Dollar yesterday. Although the downbeat US inflation figures dented Fed rate hike bets, which is generally considered a positive for the risk-sensitive ‘Aussie’, the large fluctuation in ‘Cable’ lifted Sterling higher against almost all of its most-traded currency peers.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate kicked off the week with a mild appreciation of around 40 pips. GBP/NZD is a highly volatile currency pair that often sees daily fluctuations in excess of 200 pips and as such yesterday’s Sterling gains are unlikely to have a massive bearing on future GBP/NZD movements.
Data Released
15:00 USD Consumer Confidence (MAR) High 94.0
16:30 US Fed Chair Janet Yellen Speaks to Economic Club of New York High