Sterling
Having tumbled to fresh lows at the beginning of this week’s session, the Pound managed to claw back some of its losses on Monday.
The IMF upgraded its forecasts for UK economic growth in 2017 from 1.1% to 1.5%, citing a better-than-anticipated performance in the second half of last year as reason to expect solid growth again this time out. However, this had little impact on the Sterling exchange rate and it was comments from a Downing Street spokesperson that alleviated the pressure on the Pound. The government source told reporters that the tone of recent newspaper articles, in which it was assumed that Prime Minister Theresa May was ready to give up access to the single market, was merely ‘speculation’.
Euro
The Pound to Euro exchange rate managed to rise from a two-month low yesterday, rallying around half a cent on slim hopes that the government may still pursue access to the EU single market.
However, despite the mild recovery yesterday, Sterling looks set for further declines today. Almost all signs point to a ruthless speech from the UK PM, and we can expect heavy Sterling pressure if fears of a ‘hard Brexit’ are finally made explicit. On the other hand, an unlikely softening in approach from May could actually kick-start a mini GBP/EUR revival.
US Dollar
After striking its lowest level for over 31-years – barring a one-hour period during the October 7 ‘flash crash’ – Sterling drifted mildly higher versus the US Dollar yesterday.
The UK consumer price index data is predicted to show that British inflation rose from 1.2% to a near-three-year high of 1.4% in December. But this bullish ecostat is unlikely to bolster demand for the embattled Pound, which remains constrained by ‘hard Brexit’ fears.
UK PM Theresa May’s Brexit plans will be unveiled today and the consensus view, that May will ditch single market access in exchange for greater controls on immigration, suggests there could be further historic losses for GBP/USD over the next 24 hours.
Canadian Dollar
Yesterday was what’s known as ‘Blue Monday’ – a pseudo-scientific term for the third Monday in January, which, according to a marketing report, is the most depressing day of the year. The term may not have any scientific evidence behind it but, with Sterling sliding to fresh lows versus all of its most-traded currency peers, yesterday was certainly a blue Monday for the Pound.
GBP/CAD drifted higher from its three-month trough by the end of the London session yesterday but further losses are possible following today’s statement from Theresa May.
Australian Dollar
Despite remarks from Bank of England Governor Mark Carney hinting that higher inflation could prompt the bank to raise interest rates in the foreseeable future, Sterling remained at depressed levels against the Australian Dollar yesterday. GBP/AUD ticked higher during the London session but remained close to the two-month low struck at the beginning of the new week.
New Zealand Dollar
GBP/NZD was lifted from a two-month low yesterday but looks likely to plunge again today if UK PM May conforms to the market expectation that she is going to lay out plans for a so-called ‘hard Brexit’. Also on the agenda is the New Zealand dairy auction, which could shape demand for the commodity-correlated ‘Kiwi’.
Data Released
GBP UK Prime Minister May Speaks on Her Brexit Approach High
09:30 GBP Consumer Price Index (YoY) (DEC) High 1.4%
10:00 EUR German ZEW Survey (Economic Sentiment) (JAN) Medium 18.4