Sterling
The Pound maintained strong gains against the majors yesterday as robust UK retail sales data added to the positive Sterling sentiment generated by polling data giving the remain camp an 18-point lead in the run-up to next month’s EU referendum.
Compared to expectations of a 2.0% rise, the Office for National Statistics (ONS) reported yesterday that British retail sales advanced 4.2% year-on-year in April. On a monthly basis the retail sales index increased 1.3%. Analysts noted that low inflation was driving demand in the consumer sector, which could help to prop-up economic growth while other areas cool.
Euro
The Pound to Euro exchange rate struck its joint-highest level for three-and-a-half months yesterday.
Sterling maintained support following the recent swing in opinion polls in favour of the remain camp and demand accelerated in response to April’s sturdy retail sales report. The Euro, on the other hand, suffered as the European Central Bank signalled that it was prepared to act again if inflation fails to rebound.
Earlier this week it was reported that Eurozone consumer prices declined -0.2% in April and the prevailing attitude among analysts is that the ECB will be moved to loosen policy again at some point over the next 6-12 months. Minutes from the central bank’s latest meeting suggest that officials are currently in wait-and-see mode, but if they do not see a significant shift higher in inflation expectations then the prospect of further easing will likely come back into focus.
US Dollar
Sterling touched its highest level in a fortnight against the US Dollar yesterday in response to the better-than-anticipated UK retail sales report.
Stock markets around the world tumbled yesterday as investors looked to price in a 30% chance of the Federal Reserve raising rates in June. The Fed’s minutes report, released on Wednesday evening, showed that policymakers considered June’s get together a ‘live’ meeting.
However, the ‘Greenback’ was unable to appreciate versus the Pound because the majority of traders still anticipate that the Fed will refrain from hiking next month. The uncertainty of the ‘Brexit’ referendum is considered too threatening to risk unsettling financial markets with higher interest rates.
Canadian Dollar
The Pound soared to a near-three-month high against the Canadian Dollar yesterday, rallying 120 pips, as British sentiment continued to improve.
This afternoon’s releases are tipped to show a -0.6% drop in Canadian retail sales, which could hurt the Canadian Dollar. However, the domestic inflation index is expected to rise from 1.3% to 1.7% and this could prove supportive to the ‘Loonie’.
Australian Dollar
Sterling rallied by around a cent against the Australian Dollar yesterday to strike a fresh three-month high, despite Australian labour data beating market expectations.
The ‘Aussie’ unemployment rate was anticipated to have risen from 5.7% to 5.8% in April, but data showed the jobless gauge actually remained at 5.7%. However, this positive ecostat was not enough to halt Sterling’s surge across the currency board yesterday.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate rose to a new three-month high yesterday as market sentiment reflected favourably on Sterling following the release of much better-than-expected British retail sales data.
Data Released
13:30 CAD Retail Sales (MoM) (MAR) Medium -0.6%
13:30 CAD Consumer Price Index (YoY) (APR) High 1.7%