Sterling
The Pound struggled yesterday as a sturdy service sector PMI print did little to boost Bank of England rate hike bets.
The March services PMI came in at 53.7, beating expectations of 53.5 and up on February’s score of 52.7. However, the composite private sector index of activity for the first three months of 2016 marked the slowest quarter of growth since the start of 2013. Taking into account available data it now looks as if the British economy decelerated from 0.6% to 0.4% in Q1 and investors reacted to this news by selling Sterling versus most of the majors.
Euro
Sterling tumbled by around a cent to strike a new 19-month low against the Euro yesterday as markets reacted to the BoE financial policy committee’s latest warning on the dangers of a vote to leave the European Union.
The FPC reiterated its claim that a ‘Brexit’ was the single biggest domestic risk to the UK economy and this helped pile more pressure on the downtrodden Pound ahead of the June 23 referendum.
Data wise, the Eurozone saw private sector performance slow, with the composite PMI cooling from an initial estimate of 53.7 to 53.1. However, the report did not give Sterling the impetus to rally against the single currency and later on in the morning it was reported that Eurozone retail sales jumped from 2.0% to 2.4% in February.
US Dollar
Sterling shrank -100 pips to strike a weekly low versus the US Dollar yesterday as investors shunned the UK currency following March’s PMI data, which pointed to a slowdown in first quarter British growth.
Across the pond in the United States it was reported that service sector activity rebounded from 49.7 to 51.3 in March, beating expectations of 51.0. The encouraging private sector report, however, was accompanied by a worrying trade balance print, which showed that America’s mammoth deficit swelled from -$46.2 billion to -$47.1 billion in February. Despite the 2.6% ballooning of the US trade deficit the ‘Greenback’ managed to break down Sterling’s defences and register a one-cent daily gain.
Canadian Dollar
The Pound to Canadian Dollar exchange rate avoided depreciation yesterday as traders reacted to news of Canada’s most lucrative export, crude oil, sliding to a one-month low.
US gasoline demand shrank for the first time in 14 months at the beginning of the year according to data from the US Energy Information Administration, which, combined with the current supply glut, boded ill for crude prices. The news allowed the embattled Sterling to hold its ground against the ‘Loonie’.
Australian Dollar
Sterling and the Australian Dollar both saw demand drop yesterday, which ultimately led to a choppy day of trading. The Pound suffered from enhanced ‘Brexit’ bets as domestic data suggested that economic activity slowed at the beginning of the year, while the ‘Aussie’ was hit by a warning from the Reserve Bank of Australia that interest rates could be slashed if the domestic currency continued to appreciate. The RBA left rates on hold at 2.00% but noted further cuts were possible if the Australian Dollar exchange rate was seen to be damaging the nation’s export prospects.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate tumbled by around a cent yesterday as markets reacted to a rare rise in dairy prices at New Zealand’s latest dairy auction. A 2.1% increase in the pay out received by dairy farmers helped drive GBP/NZD lower on the day.
Data Released
19:00 USD U.S. Fed Releases Minutes from March 15-16 FOMC Meeting Medium