Sterling
After a bumper week of gains, Sterling slipped back against the majors on Friday.
The Pound saw a massive wave of support on Wednesday in response to sturdy retail sales data and a poll showing that Britons would likely vote to remain in the EU next month. Demand for Sterling remained strong during Thursday’s session but profit-taking stances dragged the UK currency down a little on Friday.
Data from the Confederation of British Industry (CBI) showed that UK factory output is currently rising at its fastest pace since last August but the report had little impact on Sterling trading patterns.
Euro
The Pound to Euro exchange rate softened by around a cent on Friday as traders took advantage of the highest Sterling to Euro rate since the beginning of February.
The single currency was also boosted by comments from European Central Bank official Benoit Coeuré suggesting that policymakers were not planning to reduce the deposit rate further. The ECB’s deposit rate currently stands at -0.4%, in an attempt to persuade commercial banks to lend to the real economy rather than parking their funds at the central bank. Analysts expect the ECB to loosen policy further over the next 6-12 months but hopes of further deposit rate cuts were dampened when Coeuré said: ‘It is in principle possible to cut this rate further, but there is currently no plan to do so’.
US Dollar
Sterling also slipped back against the US Dollar on Friday as profit-taking stances weighed on GPB/USD.
‘Cable’ appreciated by around two cents on Wednesday and reached a fortnightly high on Thursday but the Pound’s momentum ran out on Friday and Sterling weakened by around a cent against the ‘Greenback’.
GBP/USD currently stands at around 1.45 but some analysts believe that, regardless of the outcome of the ‘Brexit’ referendum, the Pound could plummet -20 cents against the US Dollar over the next year. They argue that ‘Cable’ could hit a ‘fair value’ of 1.25 if the Federal Reserve hikes rates by 50 basis points and the Bank of England holds firm.
Canadian Dollar
Sterling tumbled by around -80 pips against the Canadian Dollar on Friday as investors reacted to upbeat inflation data from North America.
Bank of Canada rate cut fears cooled in reaction to the consumer price index report, which saw the headline inflation rate rise from 1.3% to 1.7% thanks to higher food and shelter prices. However, it was not all good news for the ‘Loonie’: Canadian retail sales printed at -1.0%, confounding expectations of -0.6%.
Australian Dollar
The Pound depreciated by around -150 pips against the Australian Dollar on Friday as GBP/AUD bounced lower from a three-month high.
Antipodean data was thin on the ground on Friday so traders of the commodity-sensitive ‘Aussie’ Dollar focussed on wider risk themes. Oil prices rose 4% last week and subsequently risk sentiment favoured the ‘Aussie’.
New Zealand Dollar
Sterling decreased in value by around two cents against the New Zealand Dollar on Friday as risk trends boosted the appeal of the ‘Kiwi’ and profit-taking stances weighed on the Pound.
Data Released
09:00 EUR Markit Eurozone Composite PMI (MAY P) Medium 53.2
14:45 USD Markit US Manufacturing PMI (MAY P) Medium 51.0
15:00 EUR Eurozone Consumer Confidence (MAY A) Medium -9