Sterling
Sterling struggled to make any headway against the majority of its currency peers yesterday as risk currencies rallied on the back of the Federal Reserve’s latest dovish shift and as the Euro benefitted from a better-than-forecast German inflation report.
Later this morning British data is tipped to show that consumer credit dropped from £1.6 billion to £1.3 billion in February and that mortgage approvals cooled from 74,600 to 73,500. The unappealing figures, which could put a little bit of selling pressure on Sterling, are likely to be accompanied by confirmation that the UK economy grew at an annualised pace of 1.9% in the fourth quarter of 2015.
Euro
The Pound lost out by just over half a cent against the Euro yesterday as markets reacted to a surprise uptick in German consumer prices.
On a monthly basis German inflation doubled from 0.4% to 0.8%, while the headline annualised price pressure print rose from 0.0% to 0.3%. The upbeat figures bolstered the appeal of the single currency because they were seen to reduce the prospect of further near term stimulus from the European Central Bank. They also prompted investors to update their predictions for this afternoon’s Eurozone CPI report. The consensus was for a -0.1% score prior to the German print but analysts are now hopeful that the European index could rise out of negative territory and this is proving supportive to the single currency.
US Dollar
Sterling maintained its post Yellen speech gains against the US Dollar yesterday but failed to sustain any further appreciations.
The Federal Reserve Chairwoman’s cautious announcement, which featured an argument for hiking rates very gradually, warnings over the impact of the Chinese slowdown and talk of further QE, seriously hampered the ‘Greenback’ on Tuesday evening and could yet drive the Dollar lower over the coming days and weeks if other policymakers begin curbing their enthusiasm for near term rate hikes.
Canadian Dollar
The Pound to Canadian Dollar exchange rate slid by over -150 pips yesterday as demand for risk-sensitive currencies like the ‘Loonie’ continued to surge following the dovish Fed statement.
There is potential for further Canadian Dollar strength this afternoon because January GDP is anticipated to show a 0.3% monthly acceleration and a robust 1.1% annual print, up from 0.5% previously.
Australian Dollar
The Pound depreciated by around a cent against the Australian Dollar yesterday thanks to a meteoric rise in global risk sentiment. The threat of an April rate hike from the Federal Reserve – stoked by hawkish comments from policymakers last week – had been driving investors’ appetite for risk down but the decidedly dovish message from Fed Chairwoman Janet Yellen on Tuesday evening released a new wave of demand for the ‘Aussie’ and this search for yield continued during yesterday’s session.
New Zealand Dollar
Sterling followed a steeper trajectory lower versus the New Zealand Dollar yesterday, depreciating by over two cents as global risk sentiment dampened the appeal of the Pound compared to the high-beta ‘Kiwi’.
Data Released
09:30 GBP Net Consumer Credit (FEB) Medium 1.3b
09:30 GBP Mortgage Approvals (FEB) Medium 73.5k
09:30 GBP Gross Domestic Product (YoY) (4Q F) Medium 1.9%
10:00 EUR Euro-Zone Consumer Price Index Estimate (YoY) (MAR) High -0.1%
13:30 CAD Gross Domestic Product (MoM) (JAN) Medium 0.3%
13:30 CAD Gross Domestic Product (YoY) (JAN) High 1.1%