Sterling
Robust UK data helped Sterling maintain its recent gains versus some of the majors on Friday. Manufacturing, industrial production, construction output, trade balance and GDP forecast reports all printed higher-than-anticipated.
The most pleasing readings for holders of the Pound were the overachieving manufacturing and industrial production figures for December, which were seen to bode well for a potential upgrade to fourth quarter GDP. Manufacturing smashed forecasts of 0.5% with a 2.1% monthly expansion and industrial production came in at 1.1%, beating estimates of just 0.2%. On top of that, construction output jumped from 0.4% to 1.8%, the UK’s trade deficit shrank from -£11.6 billion to -£10.9 billion and the National Institute of Economic and Social Research estimated that GDP growth accelerated from 0.5% to 0.7% in January.
Euro
The Pound to Euro exchange rate drifted higher over the weekend following Friday’s strong UK data flow. The triple whammy of strong private sector performance, an unexpected dip in the deficit and a projected uptick in GDP bolstered the appeal of Sterling as traders continued to witness better post-Brexit economic indicators than many had predicted.
Holders of the Euro, meanwhile, remained gripped by fears that political populism could help anti-EU parties gain in popularity at a number of key Eurozone elections later this year. Germany, France, Holland – and possibly Italy – all face testing votes in 2017.
US Dollar
Sturdy UK data prevented the Pound softening against the US Dollar on Friday, however, GBP/USD was unable to post any gains due to news of a corporate merger that will see huge amounts of Sterling exchanged into Dollars.
Britain’s Reckitt Benckiser – the company that owns Durex – agreed to purchase US infant formula company Mead Johnson Nutrition in a deal that could see around £13.2 billion transferred into the ‘Greenback’.
Data Stateside showed that consumer confidence fell back from an index of 98.5 to 95.7 in February, disappointing forecasts of 97.8. The University of Michigan, who compiled the survey, reported a marked difference between Republican and Democrat voters, with Republicans around 40 points more optimistic than Democrats since Donald Trump’s surprise election victory.
Canadian Dollar
The Pound to Canadian Dollar exchange rate tumbled by around half a cent on Friday thanks to some better-than-expected Canadian labour data. Bank of Canada easing bets were reduced following an unexpected dip in the nation’s jobless rate from 6.9% to 6.8%. And demand for the ‘Loonie’ jumped as January saw the North America economy add 48,300 new jobs, which comprehensively outperformed forecasts of a -5,000 job reduction.
Australian Dollar
A rise in the value of iron ore – one of Australia’s most lucrative exports – drove the ‘Aussie’ higher against the Pound over the weekend. However, GBP/AUD began to flatten out a bit at the beginning of this week’s session due to concerns that a steeper-than-projected slowdown from 1.4% to 1.0% in Japanese annualised GDP could have a negative impact on trade prospects between Japan and Australia.
New Zealand Dollar
Sterling remained fairly flat versus the New Zealand Dollar over the weekend despite Friday’s surprisingly robust set of domestic UK data releases.