- Sterling soars again – On reduced ‘Brexit’ bets.
- UK GDP data on tap – GBP/EUR hits fresh 3.5-month high.
- ‘Cable’ strikes 3-week high – US service sector disappoints.
- BOC leaves rates on hold – GBP/CAD flat on day.
Sterling
Sterling continued to make inroads against its most-traded currency peers yesterday as markets cut back on ‘Brexit’ predictions.
Another poll, this one carried out on the telephone by Survation, gave the ‘Remain’ camp a sizable lead in the run-up to next month’s EU referendum. The survey suggested that 44% of respondents would vote to stay in the EU, while 38% would seek to leave the bloc. The poll helped boost the appeal of the Pound as ‘Brexit’ bets reduced for a second consecutive day.
Later this morning British GDP data is tipped to confirm that the UK economy grew by 0.4% in the first quarter. A lower score could temper sentiment towards the Pound while a higher print could give the rejuvenated Sterling another boost.
Euro
The Pound to Euro exchange rate rallied to a fresh three-and-a-half-month high yesterday, appreciating by around half a cent as market sentiment shifted to reflect less chance of Britons voting to leave the EU next month.
European economic sentiment was buoyed by news that Greece’s lenders have agreed to release €10.3 billion of bailout loans to keep the embattled Hellenic nation’s finances afloat over the summer. Analysts said that the smooth negotiations could be, in part, attributed to EU officials being on best behaviour so as not to rock the boat ahead of June’s ‘Brexit’ referendum.
However, the single currency didn’t see much of a spike in demand related to the Greek deal. Neither did the Euro benefit from data showing that German business confidence rose from 106.6 to 107.7 in the IFO’s latest survey.
US Dollar
Sterling strengthened by just under a cent yesterday to strike a new three-week high against the US Dollar.
The Pound benefitted from the aforementioned improvement in UK economic sentiment, related to the reduction of investors’ ‘Brexit’ bets. The ‘Greenback’, on the other hand, suffered as Markit’s PMI survey of service sector activity undershot economists’ expectations. The services print came in at 51.2, missing forecasts of 53.1, as business optimism shrank to its lowest level since 2009.
Canadian Dollar
The Pound was forced to give back its morning gains against the Canadian Dollar yesterday as markets reacted positively to the Bank of Canada’s decision to leave rates at 0.50%.
The BOC warned that the Alberta wildfires would probably push domestic growth into the red in the second quarter but decided against cutting rates to compensate for the reduction in oil production. Central bank officials noted that growth would rebound in Q3 as oil fields reopen and rebuilding work boosts output.
Australian Dollar
The Pound to Australian Dollar exchange rate hit a new three-and-a-half-month high yesterday on improved economic confidence in Britain.
The risk-correlated ‘Aussie’ has struggled to attract buyers this week due to fears that the Reserve Bank of Australia is going to slash rates again in the near future. RBA Governor Glenn Stevens recently reaffirmed the bank’s commitment to doing whatever it takes to drive inflation, which is currently running at just 1.3%, to the target band of 2%-3%.
New Zealand Dollar
The New Zealand Dollar followed its Antipodean counterpart, the ‘Aussie’, to a new three-month low yesterday. GBP/NZD ticked higher by around a cent despite recent New Zealand data showing that the nation’s trade surplus widened unexpectedly from NZ$189 million to NZ$292 million in April.
Data Released
09:30 GBP Gross Domestic Product (QoQ) (1Q P) Medium 0.4%
09:30 GBP Gross Domestic Product (YoY) (1Q P) High 2.1%
13:30 USD Durable Goods Orders (APR P) High 0.5%