Sterling
Sterling recovered slightly against most of the majors yesterday even though new UK trade data showed that the first quarter British deficit widened to its worst level since the midst of the financial crisis in 2008.
Despite the downbeat headlines, investors were actually encouraged by the trade figures because they came in slightly better than most analysts had anticipated. The report showed that during the month of March the deficit stood at -£11.2 billion, which beat forecasts of -£11.5 billion.
Data due this morning is predicted to see UK industrial production expand 0.5% over the month but shrink -0.4% on the year. Similarly, manufacturing activity is tipped to rise 0.3% on the month and slide -1.9% on the year. Considering a trio of results last week showed that Britain’s private sector slumped to a three-year low in April, markets are unlikely to put too much pressure on the Pound if today’s factory output figures disappoint.
Euro
Sterling ticked higher by around a third of a cent against the Euro yesterday as British trade data printed a little bit better than most forecasters had expected.
Across the channel in the Eurozone, the currency bloc’s strongest economy suffered from a disappointing industrial production report. Germany’s industrial sector saw growth cool from 2.0% to 0.3% in March, it was reported yesterday, and subsequently demand for the single currency softened somewhat.
However, general European economic sentiment was on the up because Germany appears to have softened its opposition to Greek debt relief. Greek stocks jumped 3% to a 2016 high, and the Hellenic nation’s 10-year bonds shrank -66 basis points to a 2016 low in response to the positive development, which could help put Greece back on a path towards sustainable public finances.
US Dollar
The Pound to US Dollar exchange rate rallied by around half a cent yesterday as demand for the ‘Greenback’ softened.
Federal Reserve policymaker William Dudley said yesterday that the global financial system would be stronger if more world currencies attained reserve currency status. Although the remarks did not directly concern the value of the ‘Greenback’, some traders appear to have taken them as a bearish signal. This is because an openness to more reserve currencies could see the Dollar – the premier reserve currency – lose some of its 60% market share.
Canadian Dollar
GBP/CAD traded higher by around 60 pips higher on the day yesterday, despite a 2% rise in crude oil prices.
Canada’s most lucrative export rallied as outages at home, where the Alberta wildfire has reduced output by 1.6 million barrels a day, and in Nigeria, where production is down to a 20-year low due to militant attacks on the nations extraction plants, reduced the amount of crude reaching the marketplace.
Australian Dollar
Sterling briefly struck a two-and-a-half-month high against the Australian Dollar yesterday morning as Australian rate cut bets persisted. The Reserve Bank of Australia cut rates unexpectedly last week and signalled that further easing is on the cards, and in light of this development it is entirely possible that the ‘Aussie’ could continue to weaken over the next few weeks.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate surged by around 125 pips yesterday to reach a new two-month high as the CRB index of global commodity prices tumbled -1.6%. The ‘Kiwi’ is susceptible to dips in all commodity prices, even ones not produced in New Zealand, because the Antipodean currency is seen as a risk-correlated currency. In times of global risk aversion it is common to see commodities decline – often dragging the ‘Kiwi’ lower with them.
09:30 GBP Industrial Production (MoM) (MAR) Medium 0.5%
09:30 GBP Industrial Production (YoY) (MAR) Medium -0.4%
09:30 GBP Manufacturing Production (MoM) (MAR) Medium 0.3%
09:30 GBP Manufacturing Production (YoY) (MAR) Medium -1.9%