Sterling
The Pound flatlined versus most of its most-traded currency peers on Friday as data showing that manufacturing activity shrunk by more-than-expected in February boded ill for the UK economy.
On a monthly basis manufacturing output shrunk -1.1%, massively underwhelming analysts’ forecasts of a slender -0.2% drop. On a yearly basis the factory sector plunged -1.8%, which marked the worst score since July 2013. In reaction to the downbeat manufacturing numbers the National Institute of Economic and Social Research (NIESR) estimated that British economic growth halved from 0.6% in the final three months of 2015 to 0.3% in the first quarter of 2016.
Euro
The Pound to Euro exchange rate ticked higher by around 20 pips on Friday as an early morning Sterling rally collapsed when the dud manufacturing output numbers were released.
The single currency was unable to take advantage of the soft UK data because the latest consumer price index report from Greece showed that the Hellenic Republic suffered disinflation of -1.5% in March, down from -0.5% in February. The downbeat inflation numbers weighed on the Euro as investors were reminded that parts of the currency bloc are still feeling the legacy of the Eurozone debt crisis.
US Dollar
‘Cable’ rose by around 60 pips on Friday as traders continued to react to the latest dovish remarks from policymakers at the Federal Reserve.
At the start of the year the Fed looked on track to raise rates by 100 basis points in 2016 but officials have since cut their outlook to just 50 basis points worth of hikes and stuttering economic sentiment suggests that number may yet be cut again. This softening rate outlook is weighing on the ‘Greenback’ but the Pound to US Dollar exchange rate remains close to seven-year lows due to uncertainty surrounding the June 23 EU referendum.
Canadian Dollar
Sterling plunged to an 11-month low against the Canadian Dollar on Friday, depreciating by around -150 pips, as oil prices rose 5% and Canadian unemployment slid from 7.3% to 7.1%.
The commodity-sensitive ‘Loonie’ benefitted from a 5% jump in oil prices as hopes of a deal to curb production boosted demand. Additionally, the North American currency was bolstered by a surprise -0.2% dip in unemployment thanks to a bumper 40,600 increase in job creation.
Australian Dollar
Despite dovish remarks from Reserve Bank of Australia policymaker John Edwards, hinting that he would like to slash interest rates to prevent ‘complications’ in the economy, the Pound managed to eke out gains of around 20 pips against the Australian Dollar on Friday.
New Zealand Dollar
Sterling flatlined against the New Zealand Dollar on Friday as markets paused for thought rather than punishing GBP/NZD for the disappointing UK manufacturing activity report.
Data Released
No significant data releases due today.