Sterling
It was announced yesterday that, for the 85th month in a row, UK interest rates will remain at 0.50%. The Bank of England’s minutes report suggested that policymakers would consider cutting interest rates in the event of a ‘Brexit’, but revealed a desire to tighten policy if Briton’s vote to remain in the 29-nation bloc.
The minutes showed that business investment and consumer spending trends have both begun to slow ahead of the uncertain June 23 vote. But, more encouragingly, the committee reiterated its desire to increase the bank rate over the next few years if the UK remains inside the European Union.
The Pound was relatively unmoved by the central bank statement as ‘Brexit’ hysteria is already priced into the exchange rate. Additionally, with polls struggling to pick a clear outcome, volatility was limited because investors are unwilling to look past the June referendum.
Euro
The Pound to Euro exchange rate slid lower by around a third of a cent yesterday as markets reacted to some slightly better-than-anticipated inflation data out of the Eurozone.
The latest Eurostat consumer price index report showed that price pressures rose from -0.2% to zero in March, beating forecasts of -0.1%. Price increases at restaurants and cafes provided the biggest boost, helping to offset further dips in fuel prices. Although the stagnation in CPI does not signal economic vitality, the better-than-expected increase will give policymakers at the European Central Bank something to cheer about and should prevent any additional asset purchases at the next ECB meeting.
US Dollar
Sterling failed to make any gains against the US Dollar yesterday even though data Stateside showed that consumer prices increased at a slower pace than most analysts had expected.
The headline US CPI printed at 0.9%, down from 1.0% and less than the median market forecast of 1.1%. The soft CPI print was accompanied by an underwhelming average weekly earnings figure of 0.2%, which was much lower than the previous score of 0.6%. The ‘Greenback’ was lucky not to lose ground yesterday because reduced price pressures and decelerating wage growth could easily combine to limit the Federal Reserve’s rate hiking outlook in 2016.
Canadian Dollar
The Pound to Canadian Dollar exchange rate plunged to a fresh 15-month low yesterday afternoon as investors continued to hack away at GBP/CAD.
The ‘Loonie’ looks set to gain if the April 17 meeting between OPEC and non-OPEC oil producers yields a deal to limit oil production. However, the Canadian Dollar’s recent gains could easily be erased if the meeting disappoints.
Australian Dollar
Sterling depreciated by around two cents against the Australian Dollar yesterday to strike a 2014 low as investors piled into the ‘Aussie’ following a sturdy labour market report. The latest Australian jobs report saw the headline unemployment rate tick lower from 5.8% to a two-year low of 5.7%, beating forecasts of 5.9%. Traders were happy with the 23,100 new jobs that were created and subsequently the ‘Aussie’ rallied as Reserve Bank of Australia rate cut bets deteriorated.
New Zealand Dollar
The Pound rebounded from an 11-month low against the New Zealand Dollar yesterday, rallying by around 70 pips as traders locked in profit from the weak Sterling to ‘Kiwi’ Dollar exchange rate. The Antipodean currency was also dragged lower by the strong Australian labour figures, which pushed AUD/NZD higher and dragged the ‘Kiwi’ lower across the board.
Data Released
14:15 USD Industrial Production (MAR) Medium -0.2%
15:00 USD U. of Michigan Confidence (APR P) High 91.8