Sterling
Having bought the Pound on Tuesday afternoon ahead of yesterday’s UK GDP report, traders cashed in on Sterling’s appreciation by selling the UK currency following the fourth quarter growth report.
The Office for National Statistics (ONS) upgraded quarterly growth from 0.6% to 0.7%, but revised down annualised GDP from 2.2% to 2.0%. Notable takeaways from the economic assessment report were that exports jumped 4.1% in Q4 and that business investment shrank -1.0%.
In 2016 as a whole, business investment contracted -1.5%, a decline of -£2.7 billion. This represents the first annual decline since the aftermath of the financial crisis in 2009 and analysts warn that UK workers could suffer from weaker wage growth if the trend, which is likely a result of Brexit uncertainty, continues.
Euro
The Pound to Euro exchange rate touched a fresh two-month high yesterday but demand for Sterling eased following the UK GDP report.
Data in the Eurozone showed that the German business climate gauge rose from 109.8 to 111.0 at the start of the month and that consumer price hit 1.8% as expected. The ecostats had little impact on the GBP/EUR rate and the single currency may struggle to erode the Pound’s recent gains due to concerns over the popularity of anti-EU French far-right leader Marine Le Pen ahead of this year’s Presidential elections.
US Dollar
‘Cable’ softened by around half a cent during the London session yesterday despite a better-than-anticipated UK Q4 GDP print.
During the evening the Federal Reserve released the minutes from its latest policy meeting, which showed that a rate hike could be just around the corner. ‘Many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon’, the minutes revealed. Markets have only priced a 22% chance of a rate rise in March, with traders expecting the US central bank to wait until June, before hiking again in November and December.
Canadian Dollar
The Pound to Canadian Dollar exchange rate flatlined yesterday as a -1% dip in oil prices reduced the appeal of the commodity-sensitive ‘Loonie’. The prospect of near-term rises in borrowing costs south of the border also appeared to weigh on demand for the Canadian Dollar.
Australian Dollar
Sterling lost ground to the Australian Dollar yesterday, depreciating by around a cent, as sinking UK business investment dragged on demand for the UK currency. However, we could see the Pound perform better during today’s session if the Confederation of British Industry’s (CBI) retail sales index rises from -8 to +2 as expected.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate tumbled by around a cent during the London session yesterday as uninspiring business investment data helped depress demand for Sterling across the board.
Data Released
11:00 GBP CBI Retailing Reported Sales (FEB) Low 2