Sterling
Data released yesterday morning showed that UK retail sales rebounded in February following a worrying contraction at the beginning of the year. The Pound rallied across the board despite warnings from analysts that retail trends are likely to slow over the coming months.
The Confederation of British Industry (CBI), who speaks for 190,000 businesses reported a +9% increase in retail activity in February, up from an -8% decline in January. However, the CBI noted that 42% of retailers were concerned that rising inflation could weigh on activity over the next 12 months and 35% cited concerns regarding the uncertainty around the government’s Brexit negotiations with the EU.
Euro
Following a downgrade to Britain’s GDP growth in 2016 earlier in the week, data yesterday confirmed that Germany was the fastest growing major economy last year.
The German economy racked up an economic expansion of 1.9%, which beat Britain’s revised figure of 1.8% and the US economy’s subdued growth of 1.6%. However, the single currency failed to take advantage of the robust data out of its largest economy due to anxiety that its second largest economy may not remain part of the bloc. Fears that anti-EU French Presidential candidate Marine Le Pen could win a surprise victory at this year’s elections continue to mire the Euro’s outlook.
Earlier this week Le Pen’s hopes of riding a wave of nationalist populism – spurred by victories for Brexit and Trump – were dealt a bit of a blow when centrist candidate Francois Bayou pulled out of the race in order to back independent candidate Emmanuel Macron. The move was seen to improve Macron’s chances by condensing the centre vote into one candidate. But the single currency is likely to remain under pressure so long as Le Pen is still in the race, with investors keen not to be fooled three times in 12 months by polls playing down the chances of a populist outcome.
GBP/EUR rallied by over 60 pips.
US Dollar
The Pound to US Dollar exchange rate appreciated by around a cent yesterday to break back above key psychological support and strike a new fortnightly high. Analysts caution, however, that Sterling is fast approaching longstanding resistance that could take the wind out of the UK currency’s sails.
New US Treasury Secretary Steve Mnuchin piqued investor’s interest with talk of tax reforms and getting growth back to 3%, but traders appeared reluctant to act until the full details of President Trump’s ‘phenomenal’ tax plan are finally released.
Canadian Dollar
Sterling appreciated by around a cent yesterday to hit a two-week high as demand for the Pound drove the UK currency higher across the board. Crude oil prices rose on the day following news that US stockpiles increased by less-than-anticipated this week, however, the news was not enough to lift the commodity-correlated ‘Loonie’ against the Pound on this occasion. Today’s session is expected to see Canadian CPI tick higher from 1.5% to 1.6%.
Australian Dollar
The Pound to Australian Dollar exchange rate grew by around 120 pips yesterday as Reserve Bank of Australia Governor Philip Lowe pleaded with traders to ‘focus on other things other than quarter of a per cent moves in the cash rate’. The RBA Governor’s words came after a day of losses for the ‘Aussie’ and suggest that there is very little appetite for a near-term rate rise at the Australian central bank.
New Zealand Dollar
With Sterling rallying across the board it comes as no surprise that the risk sensitive New Zealand Dollar also succumbed to the Pound. GBP/NZD strengthened by around 70 pips.
Data Released
13:30 CAD Consumer Price Index (YoY) (JAN) High 1.6%