Sterling
The Pound reclaimed its crown as the year’s worst performing major currency on Friday as Bank of England easing measures continued to weigh on Sterling. The UK currency has now suffered heavier losses in 2016 than all of the other 30 major currencies, including the Mexican Peso, which has suffered on global risk aversion trends, and the Argentine Peso, which is still reeling from the recent removal of capital controls.
Data on Friday showed that UK construction output shrank 2.2% year-on-year in June, adding to the negative sentiment surrounding the British economy. The downbeat June result was especially worrying considering that PMI surveys since the ‘Brexit’ referendum have signalled even sharper contractions in the sector.
The Bank of England recently announced a new four-pronged stimulus programme and Sterling continues to depreciate on weak UK data as talk of further easing proliferates.
Euro
The Pound to Euro exchange rate succumbed to a new three-year low on Friday as BoE stimulus bets weighed heavily on the UK currency.
Across the Channel in the Eurozone data showed that German growth came in at 0.4% in the second quarter – double the 0.2% expected prior to the reading. However, an unexpected stagnation in Italy meant that the currency bloc as a whole expanded 0.3% as anticipated. The Eurozone industrial production index printed at 0.4%.
But it was not the half-decent European data stream that drove GBP/EUR to a new 2013 low, it was the expectation that weakness in the British economy will prompt further stimulus measures from the BoE, and consequently further reduce the profit available to holders of UK government debt.
US Dollar
Sterling struck a new monthly low against the US Dollar on Friday, falling half a cent as speculative investors continued to chip away at the embattled Pound.
American data actually came in slightly worse-than-anticipated but it was not enough to prevent further depreciations in ‘Cable’. US retail sales came in at 0.0%, significantly undershooting forecasts of a 0.4% expansion, while the University of Michigan’s consumer confidence index printed at 90.4, disappointing expectations of 91.5.
The soft results caused some analysts to pare back their forecasts for a Federal Reserve rate hike, with futures markets now indicating a 42% chance of monetary tightening from the Fed in 2016, down from 55% following July’s bumper non-farm payroll report.
Canadian Dollar
The Pound to Canadian Dollar exchange rate tumbled by a cent on Friday, as GBP/CAD hovered just above two-and-a-half-year lows.
In addition to the BoE’s dovish monetary policy outlook, Sterling also struggled against the ‘Loonie’ courtesy of a rally in crude oil prices. Although nothing has been confirmed, investors have reacted positively to comments from OPEC members suggesting that measures could be taken in September to shore-up the value of oil.
Australian Dollar
Sterling registered a rare day of slender gains against the Australian Dollar on Friday as data from China underwhelmed, suggesting that demand for Australian commodities may recede in the second half of the year.
Chinese industrial production printed at 6.0%, disappointing forecasts of 6.2% and retail sales came in at 10.2%, down from 10.6% previously.
Perhaps more worrying was news that only ¥25 billion of new credit was made available, massively underwhelming expectations of ¥300 billion and boding ill for Australia’s crucial commodity export sector.
New Zealand Dollar
The Pound remained relatively flat against the New Zealand Dollar over the weekend as signs of slowdown in China gave Sterling some much-needed respite following six days of depreciation.
Data Released
14:00 CAD Existing Home Sales (MoM) (JUL) Medium -0.9%a