Sterling
Sterling traded with a positive bias against most of the majors yesterday thanks to a rebound in consumer confidence and a strong Nationwide house price report.
The latest report from market research firm GfK showed that UK consumer sentiment rebounded from a 26-year low of -12 in July to a slightly better score of -7 in August.
The Pound also benefitted from a 5.6% jump in Nationwide’s house price index, which reflected more positively on the UK housing market than most other indicators.
However, Sterling’s gains could evaporate today if domestic PMI data disappoints. Manufacturing output is tipped to come in at 49.0 in August – up from July’s 48.2 but still below the 50.0 mark that separates growth from contraction.
Euro
The Pound to Euro exchange rate jumped 50 pips to strike a new three-week high yesterday as European Central Bank easing bets were stoked by a coupe of underwhelming data points.
Eurozone unemployment was expected to inch lower from 10.1% to 10.0% but the actual result showed that the labour market performance did not improve during July. A separate report showed that consumer prices within the currency bloc rose at a rate of 0.2%, disappointing forecasts of 0.3%. The downbeat duo weighed on the single currency due to enhanced fears that ECB President Mario Draghi and his team of policymakers may opt to adjust the central bank’s monetary easing plans at next week’s meeting. Even if the ECB does not act as soon as September, there is a substantial possibility that the bank may pave the way to further stimulus later down the line.
US Dollar
‘Cable’ strengthened by around half a cent yesterday but there is every chance that the Pound could give back its gains against the US Dollar by the end of the week.
Today’s UK factory output PMI, which is expected to print in the red, could tip the scales in favour of the ‘Greenback’. And Friday’s US non-farm payroll report has the potential to pressurise GBP/USD even further if analysts deem it strong enough to persuade Federal Reserve policymakers to vote for higher interest rates. Following a raft of hawkish statements last week, traders are now beginning to bet on a Fed rate hike by the end of the year, however, if US inflation and labour data impress the US central bank could be minded to act sooner.
Canadian Dollar
Sterling surged by just under a cent against the Canadian Dollar yesterday to strike its highest level in almost a month.
Canadian GDP data actually printed fairly positively, at 0.6% for June up from -0.6% in May. The annualised growth score of 1.1% also impressed as it beat estimates of 1.0%. However, any positive sentiment towards the commodity-correlated ‘Loonie’ following the upbeat ecostats evaporated swiftly later on in the afternoon when US crude data showed that oil inventories rose 2.3 million barrels last week – almost twice as fast as the anticipated 1.3 million barrels.
Australian Dollar
Turmoil in oil markets, combined with a market-wide mood of risk aversion, helped drag the risk-sensitive ‘Aussie’ Dollar lower against the Pound yesterday. GBP/AUD rose by around 60 pips as a rebound in UK consumer confidence buffeted the Pound higher and Federal Reserve rate hike fears dampened the appeal of the Australian Dollar.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate added around a third of a cent yesterday thanks to the recent shift in sentiment at the Fed towards tighter monetary policy. The volatile ‘Kiwi’ has seen demand wane over the past few sessions and GBP/NZD is now around two cents worse off than it was immediately prior to Fed President Janet Yellen’s hawkish speech at the Jackson Hole Symposium last Friday.
Data Released
09:30 GBP Markit UK PMI Manufacturing s.a. (AUG) Medium 49
14:30 RBC Canadian Manufacturing PMI (AUG) Medium 51.9
15:00 USD ISM Manufacturing (AUG) High 52.0