Sterling
There were a couple of UK data points released on Friday but none of them managed to have a noticeable impact on demand for the Pound because they were considered statistics of low importance.
The Office for National Statistics reported that British construction output shrunk -0.3% in February but, more encouragingly, they noted that the industry expanded 1.5% during the first quarter. Factory and warehouse projects suffered a steep -11.0% quarterly contraction but almost all other sections of the sector saw increases, with public house building leading the way with a 7.4% expansion.
In other news UK Chancellor George Osborne stated that a vote to leave the EU would likely lead to higher interest rates. Osborne proposed that a post-‘’Brexit’ run on Sterling would drive import prices higher and subsequently lead to ballooning price pressures. This, he posited, would prompt the Bank of England to start raising interest rates to combat inflation.
The Chancellor’s postulation is interesting but recent comments from BoE policymakers suggest that the central bank would probably end up lowering its benchmark interest rate in the immediate aftermath of a vote to exit the European Union.
Euro
The Pound to Euro exchange rate rose by around a quarter of a cent on Friday afternoon in reaction to some dovish remarks from European Central Bank President Mario Draghi.
Draghi cited ‘downside risks to growth prospects in emerging market economies’, weak oil prices and geopolitical risks as key concerns for European policymakers. The single currency weakened when Draghi said the ECB intends to keep the benchmark interest rate at the current record low, or lower, until at least March of next year.
US Dollar
Sterling strengthened by around half a cent against the US Dollar on Friday as Federal Reserve rate hike bets were dealt a blow by a couple of underwhelming US ecostats.
The first was a -0.6% decline in March US industrial production which followed a contraction of the same amount in February. The downbeat figure was especially unsettling for US investors because analysts had expected a bit of a rebound from February’s weak performance, which was initially put down to unseasonably warm weather reducing demand for gas and heating supplies.
The second was an unexpected drop in the University of Michigan’s consumer confidence index from 91.0 to 89.7. The result, which undershot expectations of a rise to 92.0, was seen to push out Fed rate hike prospects into the third quarter.
Canadian Dollar
The Pound to Canadian Dollar exchange rate ticked higher by around a third of a cent on Friday as expectations of a deal to curb oil output over the weekend softened.
And indeed, the dampening of expectations proved correct: the Doha meeting between OPEC nations and other major oil producers ended without a deal being reached. This weighed on the commodity-correlated ‘Loonie’ because oil prices are very important to the Canadian economy.
Australian Dollar
Sterling remained relatively flat against the Australian Dollar on Friday as Chinese growth figures matched the forecasts of most economists.
The median consensus of a slowdown from 6.9% to 6.7% was met. Although it was the lowest growth print for seven years the market reaction was muted because both industrial production and retail sales scores came in better-than-anticipated, at 6.8% compared to 6.0% and 10.5% compared to 10.3%, respectively.
New Zealand Dollar
The Pound tumbled by around half a cent against the ‘Kiwi’ on Friday as investors bet that New Zealand inflation would not drop low enough to prompt further rate cuts from the Reserve Bank of New Zealand.
Data Released
15:00 USD NAHB Housing Market Index (APR) Medium 58
23:30 NZD Performance Services Index (MAR) Medium 56.9