Sterling
Sterling managed to retain its Monday gains yesterday morning as some better-than-anticipated inflation data boosted the appeal of the Pound. However, enhanced ‘Brexit’ bets following a new opinion poll weighed on Sterling during the afternoon.
March’s headline CPI print came in at a 15-month high of 0.5%, up from 0.3% in February and better than the median market consensus of 0.4%. Price hikes in air fares and clothing stores were cited by the Office for National Statistics (ONS) as the largest contributors to the rise in price pressures.
March’s figure alone is unlikely to put any pressure on policymakers at the Bank of England to start raising rates, but if CPI continues to edge towards the bank’s 2.0% target over the next six months then the potential for rate hikes – provided Britain does not leave the EU – is liable to increase.
Euro
The Pound to Euro exchange rate rallied by around 80 pips yesterday morning in reaction to the stronger-than-anticipated UK CPI data.
However, Sterling gave up its gains during the afternoon when ICM’s latest opinion poll showed that the LEAVE camp now holds a 45% to 42% lead over the REMAIN camp in the run-up to June’s EU referendum.
The poll stoked fears of economic uncertainty and ‘Brexit’ bets surged, which dragged the Pound lower against the single currency. However, GBP/EUR managed to hold above a key psychological support level courtesy of the morning’s decent inflation numbers.
US Dollar
‘Cable’ posted a 100-pip morning rally against the US Dollar yesterday as upbeat UK inflation figures boosted the Pound and dovish Federal Reserve bets diminished the appeal of the US Dollar.
The trend, however, was reversed during the afternoon when polling data gave the LEAVE camp a three-point lead ahead of the June 23 EU referendum. GBP/USD actually ended the London session down on the day, having initially risen to a one-month high.
The main event for the currency pair on the economic calendar today is this afternoon’s US retail sales report, which could give the ‘Greenback’ a minor boost if it shows a rebound from -0.1% to +0.1% as expected.
Canadian Dollar
The Pound to Canadian Dollar exchange rate tumbled to a new 11-month low yesterday afternoon as a combination of heightened ‘Brexit’ fears and higher oil prices sent GBP/CAD spiralling lower.
Rumours that major oil-producing nations Russia and Saudi Arabia had agreed a deal to freeze output at January levels drove crude higher by 2%. The news trickled through to the currency market and helped the commodity-correlated ‘Loonie’ register a devastating 150-pip appreciation against Sterling.
Australian Dollar
The Australian Dollar also racked up gains of almost 200 pips against the Pound yesterday. The move was prompted by three factors: 1) the Australian NAB business confidence index doubled from 3 to 6 in March, 2) the latest EU exit poll led to an increase of ‘Brexit’ bets and 3) the proposed crude oil freeze boosted commodity markets, which in turn bolstered investors’ appetite for riskier asset classes, such as the ‘Aussie’.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate slumped to a -150-pip depreciation yesterday as rising risk sentiment supported the Antipodean currency and surging ‘Brexit’ fears dampened demand for Sterling.
Data Released
10:00 EUR Eurozone Industrial Production w.d.a. (YoY) (FEB) Medium 1.3%
13:30 USD Advance Retail Sales (MAR) High 0.1%
15:00 CAD Bank of Canada Rate Decision (APR 13) High 0.5%
15:00 CAD Bank of Canada Releases Monetary Policy Report High