Sterling
Demand for the Pound remained steady yesterday as markets continued to look more favourably on Sterling following hawkish comments from the Bank of England. The UK currency has registered gains versus most of the majors over the last few days thanks to BoE policymaker Kristin Forbes’ suggestion that Threadneedle Street may need to hike interest rates before the end of the year.
Data released yesterday by the BoE showed that British firms are planning to award employees smaller pay rises in 2017. Average pay rose 2.7% last year, however, the BoE’s report, which incorporated around 700 UK businesses, found that wage growth was expected to decelerate to 2.2% this time out. Although a slowdown in wage growth combined with an expected rise in price pressures is liable to hamper economic growth – we rely heavily on consumer spending in Britain – the Pound was not subjected to any significant selling pressure following the publication of the report.
Euro
The Pound to Euro exchange rate rose by around a quarter of a cent yesterday as fears of another flare-up in Greece applied downward pressure on the single currency.
After a year of Brexit talk dominating the headlines, the original Euro exit nickname – Grexit – returned to the fore this week as the nation’s creditors clashed over how to solve the crisis. The IMF termed Greece’s mammoth debt pile ‘unsustainable’ unless funders agree to accept debt write-downs, while the head of the Eurogroup, Jeroen Dijsselbloem, said that Greece had made progress and played down the idea of debt relief. A large €7 billion Greek debt repayment is due in July and analysts warn that the Hellenic nation could be expelled from the currency bloc if it cannot agree additional austerity in exchange for further funding. These Grexit fears compromised demand for the single currency during yesterday’s session and could remain a key consideration over the next few months.
US Dollar
‘Cable’ rallied through psychological resistance yesterday as the surprise hawkish comments from the BoE’s Forbes continued to drive demand for the Pound. Technical analysts noted that GBP/USD appears to be putting in a bullish run that could see Sterling appreciate by a further two-three cents versus the US Dollar.
BoE Governor Mark Carney is due to speak in London this evening and we could see Sterling fluctuate if the bank chief gives out any policy hints. Rhetoric suggesting Forbes’s hawkish outlook is not shared by the rest of the nine-person monetary policy committee would likely drive GBP/USD lower, however, any signs of concern regarding the UK’s rising rate of inflation could have the opposite effect.
Canadian Dollar
The Pound to Canadian Dollar exchange rate maintained weekly gains of around 250 pips yesterday as demand for the ‘Loonie’ was dampened by news of a large oil inventory build south of the border. US oil stocks jumped 13.8 million barrels, smashing forecasts of a 2.5 million rise. The large oil build up suggests that even with large scale production curbs in force, the amount of oil on the market outweighs the demand – and when this happens prices invariably begin to fall.
Australian Dollar
Sterling drifted higher versus the Australian Dollar yesterday as market-wide sentiment towards the UK currency was buoyed by hopes of an earlier-than-anticipated hiking of British interest rates.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate appreciated by over two cents following the latest Reserve Bank of New Zealand policy announcement last night. The RBNZ left interest rates on hold at 1.75% as expected, however the tone of RBNZ Governor Graeme Wheeler’s press conference signalled that ‘monetary policy will remain accommodative for a considerable period’ and this weighed on demand for the ‘Kiwi’.
Data Released
18:30 GBP BOE Governor Mark Carney Speaks in London