Sterling
British labour data disappointed yesterday, with wage growth slowing unexpectedly from 2.1% to 1.8%. Investors had been primed for an acceleration to 2.3% but analysts noted that anxieties in the run-up to June’s EU referendum had begun to impact the behaviour of UK businesses.
Unnervingly, the report also showed that the number of people claiming out of work benefits in Britain increased for the first time since August in February. The claimant count rose by 6,700, underwhelming forecasts of a -10,000 decline.
However, the headline unemployment rate remained at 5.1% and the Pound managed to avoid any heavy losses against the majors. During the afternoon Bank of England policymaker Ian McCafferty said that he will vote to raise interest rates soon, but admitted he was not sure when. It seems his hawkish sentiments worked in Sterling’s favour.
Euro
The Pound to Euro exchange rate appreciated by around a third of a cent yesterday, rising through psychological resistance to strike a new three-week high.
Without any significant data prints to speak of, it seems the single currency was hurt by fears of further stimulus from the European Central Bank. The ECB is unlikely to announce fresh measures at this afternoon’s meeting but investors retain a cautious approach in case President Mario Draghi hints at additional easing in his post-meeting press conference. New rate cuts appear to be off the table but a prolongation, or extension, of the QE asset-purchasing scheme does seem likely at some point over the next 12 months.
US Dollar
‘Cable’ traded above psychological resistance for the majority of yesterday’s session as hawkish sentiments from a BoE policymaker helped assuage the impact of an underwhelming domestic labour market report.
However, GBP/USD weakened during the evening and Sterling could struggle to hold its ground against the ‘Greenback’ this morning if the March British retail sales report shows a decline of -0.3%, as expected. This would follow a -0.2% contraction in February and would likely weigh on future BoE rate hike bets.
Canadian Dollar
GBP/CAD slumped a cent yesterday as crude oil prices fluctuated.
Crude initially stumped when newswires reported that a strike by Kuwaiti oil workers had come to an end. However, oil prices recovered during the afternoon when the Energy Information Administration’s (EIA) latest US inventories report showed a 2.1 million increase, which was less than the 2.4 million increase predicted by forecasters.
Australian Dollar
The Pound to Australian Dollar exchange rate is trading close to a 15-month low at the moment but analysts down under predict that the relative strength of the ‘Aussie’ will start to harm domestic growth. However, if the RBA does not step in, the risk-sensitive ‘Aussie’ could strengthen further in the months approaching Britain’s EU referendum.
New Zealand Dollar
Sterling ticked slightly higher against the New Zealand Dollar yesterday as traders locked in profit from the 11-month low GBP/NZD hit earlier in the week. With oil prices stabilising and dairy prices rising the risk-correlated ‘Kiwi’ had seen demand increase at the beginning of the week.
Data Released
09:30 GBP Retail Sales (MoM) (MAR) Medium -0.3%
09:30 GBP Retail Sales (YoY) (MAR) Medium 3.8%
12:45 EUR European Central Bank Rate Decision (APR 21) High 0.00%
12:45 EUR ECB Deposit Facility Rate (APR 21) High -0.40%
13:30 USD Initial Jobless Claims (APR 16) Medium 265k