Sterling
A resilient Sterling rallied against most of the majors yesterday even as UK data disappointed forecasts.
The Office for National Statistics (ONS) reported that British retail sales slumped -1.3% in Mach, disappointing forecasts of a mild -0.1% contraction. Even more worryingly, the ONS noted that average store prices slid -3.0% last month, marking 21 straight months of disinflation.
Additionally, budget data showed that Chancellor George Osborne overshot his fiscal targets by £1.8 billion during the 2015⁄16 financial year. Although March’s public sector borrowing figure beat economists’ expectations, it was especially embarrassing for the Chancellor to see the figure come in higher than his own forecasts – which he released just over a month ago in March.
Euro
In one of his less-memorable policy announcements, European Central Bank President Mario Draghi left rates and stimulus plans on hold yesterday.
It was April’s press conference last year when protestor Josephine Witt ‘glitter bombed’ Draghi but the speech was much less explosive this time around.
The ECB Chief hinted that rates could potentially be reduced further over the next year or so and confirmed that they would remain at the current level or lower ‘well’ beyond the expiration of the asset purchasing scheme. The QE programme is currently scheduled to finish in March of next year but it is entirely likely that the stimulus measures will continue weighing on the single currency for longer than that.
Draghi urged politicians to complement the ECB’s easing measures with growth orientated policies and reiterated that the central bank has a mandate for price stability in all of Europe, not just Germany. This was seen as a direct dig at German finance minister Wolfgang Schauble, who has explicitly criticised the bank’s accommodative measures in recent weeks.
Lacking any significant developments, the ECB statement had little lasting impact on the Pound to Euro exchange rate, which remained relatively flat on the day.
US Dollar
Sterling touched a new three-week high yesterday but downbeat UK data meant that investors were moved to lock in profit and bring the Pound back down to earth.
GBP/USD rallied by around a cent at one point but the gains proved fleeting as poor retail sales numbers and an overshooting fiscal deficit weighed on demand for Sterling. Across the pond in the US, the ‘Greenback’ took heart from an optimistic drop in jobless claims to 247,000 and an on-target house price index increase of 0.4%.
Canadian Dollar
The Pound to Canadian Dollar exchange rate grew by around half a cent yesterday as crude oil, Canada’s most lucrative export, slid -1.5%.
Later this afternoon data is anticipated to show that the headline Canadian consumer price index slowed from 1.4% to 1.2% in March. Demand for the ‘Loonie’ could also be hurt by a retail sales report which is tipped to document a -0.8% monthly contraction in February.
Australian Dollar
Sliding commodity prices helped the Pound register a half-cent daily gain against the Australian Dollar yesterday. GBP/AUD would have been expected to weaken in response to the disappointing UK ecostats but it seems wider market risk trends weighed on the ‘Aussie’ and helped Sterling rebound from a near-15-month low.
New Zealand Dollar
The Pound appreciated by around a cent against the New Zealand Dollar yesterday to strike a 10-day high as weak risk sentiment worked against the high-beta ‘Kiwi’.
Data Released
09:00 EUR Markit Eurozone Composite PMI (APR P) Medium 53.3
13:30 CAD Retail Sales (MoM) (FEB) Medium -0.8%
13:30 CAD Consumer Price Index (YoY) (MAR) High 1.2%
14:45 USD Markit US Manufacturing PMI (APR P) Medium 52.0