Sterling
After a testing end to last week’s session, demand for the Pound picked up yesterday as traders reacted favourably to the latest Confederation of British Industry (CBI) report and to the start of the Brexit debate in the House of Lords.
The CBI reported that its index of factory output struck a two-year high in February, rising unexpectedly from 5 to 8. The upbeat score was well above the long-running average of -15 and bodes well for manufacturing growth in Q1. The factory sector accounts for around 10% of UK GDP and is performing well at the minute, however, analysts noted that a marked pickup in price pressures could weigh on domestic demand later on in the year.
Sterling also appeared to receive a lift from the prospect of peers in the House of Lords voting to make amendments to the government’s Brexit bill. The two-week debate, which began yesterday, is unlikely to see Lords block Brexit but it could see peers attach clauses allowing parliament a greater say in the Brexit negotiations.
Euro
There was a breakthrough in Greek debt talks with European creditors yesterday but it was not enough to prevent Sterling registering a half-cent daily gain versus the Euro.
A meeting between Athens and its creditors was concluded ahead of schedule, with Greek authorities agreeing to let European officials come up with a new package of tax reforms and labour market regulations in order to receive future tranches of financial aid. There is a long way to go before the situation is stabilised and Greece’s position in the Eurozone is secured but the breakthrough was, nevertheless, seen as a positive step for the single currency.
Data released this morning is likely to show that manufacturing activity in the currency bloc remained sturdy at 55.0 at the start of the month.
US Dollar
‘Cable’ rose in value by around a third of a cent yesterday as robust British manufacturing output drove investors back into the Pound.
Later this morning Sterling sentiment could shift if Bank of England Governor Mark Carney gives out any future policy clues. Slowdowns in consumer spending trends could prompt a dovish message from the banking chief but, on the other hand, rising inflation and robust GDP growth could persuade Carney to bring forward his estimates of a first rate rise.
Also on the agenda is a set of US private sector PMI reports, which are tipped to show strong activity in the region of 55.0-55.8.
Canadian Dollar
The Pound to Canadian Dollar exchange rate rallied by around 60 pips to rebound from a 10-day low yesterday as hopes of the House of Lords attaching amendments to the Brexit bill spurred the UK currency higher. Traders believe that greater parliamentary scrutiny will likely lead to a softer Brexit outcome, which many analysts posit would be beneficial to the British economy and the British Pound.
Australian Dollar
The Pound bounced higher against the Australian Dollar yesterday ahead of and after the latest Reserve Bank of Australia minutes report, which showed no desire from the RBA to start raising interest rates anytime soon.
New Zealand Dollar
Sterling appreciated by around half a cent versus the New Zealand Dollar yesterday as sturdy manufacturing output and hopes of a softer Brexit bolstered the appeal of the Pound.
Data Released
09:00 EUR Markit Eurozone Manufacturing PMI (FEB P) Medium 55
09:30 GBP Public Sector Net Borrowing (Pounds) (JAN) Medium -14.5b
10:00 GBP BOE Governor Mark Carney Speaks in U.K. Parliament High