Sterling
Sterling traders breathed a sigh of relief yesterday as UK GDP came in bang inline with economists’ expectations.
The Office for National Statistics (ONS) reported that Britain’s growth rate slowed from 0.6% to 0.4% in the first three months of 2016, as business services and finance activity cooled. Analysts noted that firms were reluctant to expand during the uncertain period ahead of June’s EU referendum.
The Pound traded relatively flatly following the GDP report, which was understandable really as recent forecasts suggest that the UK will remain part of the EU – suggesting that growth should accelerate later on in the year.
Euro
The Pound to Euro exchange rate slumped by around half a cent yesterday despite news from Athens that relations between the Greek government and the nation’s lenders were fraying once more. Greek two-year bonds rose 160 basis points to 12% as Greek officials defied calls for further austerity, which lenders claimed was needed to meet the Hellenic Nation’s bailout targets.
It seems investors are willing to overlook the Greek situation for the moment and traders opted to lock in profit from the five-week high exchange rate that Sterling struck at the beginning of the week.
Data today is expected to show that German unemployment remained sturdy at 6.2% but the single currency could be knocked if German inflation slows from 0.3% to 0.1%, as anticipated.
US Dollar
The US Dollar moved slightly higher against Sterling yesterday as the Federal Reserve endeavoured not to rule out a rate hike in June.
The US central bank left rates on hold at 0.25%, citing concerns relating to domestic inflation pressures, slow global growth and the prospect of Britain exiting the European Union in June. However, policymakers left the door open to a move in June and this gave the ‘Greenback’ a bit of a boost because market participants had previously been primed for no change until Q3.
This afternoon’s key US growth report is tipped to show a sharp slowdown in economic activity at the start of the year. The world’s largest economy grew at an annualised rate of 1.4% in the fourth quarter of 2015 but forecasters expect that figure to have slowed dramatically to 0.6% in the first quarter of 2016. This could easily weigh on the ‘Greenback’ during today’s session.
Canadian Dollar
GBP/CAD weakened by around a third of a cent yesterday.
The Pound initially rallied as oil prices tumbled on US data showing that crude inventories jumped two million barrels to a record peak of 540.6 million barrels last week. However, oil prices slowly recovered during the afternoon in the run-up to the Fed’s latest policy decision.
Australian Dollar
The Pound to Australian Dollar exchange rate roared ahead by over three cents yesterday to strike a six-week high as Australian inflation data came in much weaker-than-anticipated.
Australian CPI contracted at a quarterly rate of -0.2% during the first three months of the year, bringing the headline rate down from 1.7% to 1.3% and massively increasing the prospect of another interest rate cut from the Reserve Bank of Australia.
New Zealand Dollar
Sterling depreciated by around -250 pips against the New Zealand Dollar last night in reaction to the Reserve Bank of New Zealand’s latest policy statement. Analysts had anticipated a dovish statement with hints of imminent stimulus but the RBNZ left rates on hold and maintained a neutral outlook going forward. This sent investors piling back in to the ‘Kiwi’.
Data Released
08:55 EUR German Unemployment Rate s.a. (APR) High 6.2%
13:00 EUR German Consumer Price Index (YoY) (APR P) High 0.1%
13:30 USD Gross Domestic Product (Annualized) (1Q A) High 0.6%
13:30 USD Personal Consumption (1Q A) High 1.7%