Sterling
The Pound softened across the board on Friday as UK construction output printed dreadfully and the Bank of England’s chief economist called for a ‘material easing of monetary policy’.
Following the BoE’s surprise decision to leave rates on hold in July, policymaker Andy Haldane gave a surprisingly direct speech, in which he urged the Monetary Policy Committee to unleash a comprehensive package of stimulus measures at next month’s meeting. Demand for Sterling plummeted following the statement as investors bet that the BoE will restart its QE bond-buying scheme next month in addition to slashing rates.
The Pound was also hurt by news that UK construction output slumped 2.1% in May, when housebuilding activity dried up in anticipation of June’s ‘Brexit’ vote.
Euro
The Pound to Euro exchange rate depreciated by around a cent on Friday in response to BoE chief economist Andy Haldane’s call for ‘muscular’ monetary policy in August.
Haldane’s colourful analogy that he’d rather ‘run the risk of taking a sledgehammer to crack a nut than take a miniature rock hammer to tunnel out of prison’ suggests that the MPC is planning big moves next month and this took the wind out of Sterling’s sails going into the weekend.
Across the channel, data showed that Eurozone consumer prices rose just 0.1% in June, meeting the market consensus and confirming that more needs to be done to stimulate price pressures in the bloc. The European Central Bank has hinted that it could unleash more stimulus and it is possible that the bank could act either this week or in the near future to boost demand post-‘Brexit’. This factor has tempered the single currency’s gains against the Pound.
US Dollar
‘Cable’ plunged over 150 pips on Friday as US data impressed and UK stimulus bets were stoked by dovish comments from the BoE’s Andy Haldane.
A raft of American ecostats were released on Friday, the majority of which showered positive light on the world’s largest economy. Retail sales accelerated from 0.2% to 0.6% in June, industrial production rebounded from a -0.3% decline to expand 0.6% and business inventories doubled from 0.1% to 0.2%. Additionally, the headline consumer price index remained at 1.0%, while the core figure, which strips out volatile food and fuel prices, ticked higher to an above-target 2.3%.
The robust round of prints led some analysts to predict that the US economy grew between 2.5%-3.0% in the second quarter, which was considered sturdy enough to prompt the Federal Reserve to consider hiking interest rates before the end of the year. However, with the uncertainty of the ‘Brexit’ situation weighing on global trade and the limbo of a US Presidential election on the horizon it seems more likely that the Fed will opt to wait on the sidelines at this juncture.
Canadian Dollar
The ‘muscular’ monetary policy remarks from BoE policymaker Andy Haldane were the main driver behind a one-cent devaluation of the Pound to Canadian Dollar exchange rate on Friday.
The commodity-correlated ‘Loonie’ also drew support from a rise in oil prices over the weekend. Demand for crude spiked as markets reacted to news of a failed military coup in Turkey, which some feared could disrupt oil transport routes in the region.
Australian Dollar
The Australian Dollar strengthened by around a cent versus the Pound on Friday as unsettling UK construction data and major stimulus forecasts weighed on the British currency.
The ‘Aussie’ also benefitted from some better-than-anticipated Chinese data, which saw industrial production rise from 6.0% to 6.2% and retail sales jump from 10.0% to 10.6%, prompting second quarter GDP to remain at 6.7% despite forecasts of a fall to 6.6%. The sanguine figures boosted sentiment in the Asia-Pacific region.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate tumbled on Friday as the positive impact of the Bank of England’s decision to leave rates on hold in July started to wane and markets reacted to an extremely dovish statement from BoE policymaker Andy Haldane. The risk-correlated ‘Kiwi’ received a slight boost from the better-than-expected Chinese retail, industrial and GDP numbers.