Sterling
UK mortgage approvals struck a 12-month high on Friday but it was not enough to stoke demand for the Pound, which sustained losses as investors locked in profit from Sterling’s strongest week since January.
Loans for house purchases jumped 2.5% to a yearly high of 44,657 in January but the ecostat had little impact on demand for Sterling. After a week without any major Brexit developments – which are often deemed negative for the UK currency – the Pound ticked higher across the board and it seems that investors saw Friday’s session as an opportunity to cash in on profitable trades. Despite losing ground across the board, Sterling still closed for the week 0.8% higher against a basket of its most-traded currencies.
Euro
The Pound to Euro exchange rate tumbled by around -60 pips on Friday as profit hungry traders cashed out after Sterling reached a two-month high versus the single currency last week.
Over the weekend the Euro was buoyed by a poll indicating that Independent French Presidential candidate Emmanuel Macron was likely to beat far-right National Front candidate Marine Le Pen with 61% of the vote in the second round of the election. Le Pen’s anti-EU stance and desire to take France – the Eurozone’s second largest economy – out of the currency bloc mean that the single currency would be susceptible to intense selling pressure if she were to win.
Having been burnt twice over the past year by surprise results that went against the polls – Brexit and Trump – markets appear more cautious heading into the French elections and there has been a lot of Euro selling to hedge against another shock victory for nationalist populism.
US Dollar
Sterling crashed through key psychological support against the US Dollar on Friday as hawkish Federal Reserve policy bets contrived to drive GBP/USD lower.
Data on the day showed that US new home sales rebounded from a -7.0% contraction in December with a +3.7% expansion in February. However, the figure failed to materially alter demand for the ‘Greenback’ because it was much lower than market forecasts of +6.4%.
On Tuesday US President Donald Trump is due to give his first major Presidential address in which markets are hopeful he will finally release concrete details of his economic plan. If Trump gives a statement featuring details on his ‘phenomenal’ tax plan and promised infrastructure spending projects, which analysts deem achievable then the US Dollar is liable to rally strongly. If the President fails to convince investors then ‘Cable’ could appreciate.
Canadian Dollar
A much larger-than-anticipated jump in Canadian inflation allowed the ‘Loonie’ to surge against the Pound on Friday. Canadian CPI printed at 2.1% in January, smashing economists’ forecasts of 1.6%, and up significantly from December’s score of 1.5%. The robust consumer price index report was seen to increase the chances of the Bank of Canada taking action to tighten policy if the trend of rising price pressures were to continue.
GBP/CAD declined by around -180 pips on the day.
Australian Dollar
The Pound to Australian Dollar exchange rate rallied to a 10-day high on Friday before giving back its gains as investors locked in profit. If Australian GDP rises from -0.5% to +0.7%, as expected, later on in the week then there is potential for Sterling to soften further versus the ‘Aussie’ Dollar.
New Zealand Dollar
The Pound weakened by around half a cent against the New Zealand Dollar on Friday as optimistic economic prospects bolstered the appeal of the ‘Kiwi’. The New Zealand economy is entering its seventh year of continued GDP growth and analysts expect the expansion to continue at robust level for another couple of years. The Antipodean nation’s sturdy outlook means that Sterling could struggle to post any lasting gains over the long term.
Data Released
13:30 USD Durable Goods Orders (JAN P) High 1.9%