Sterling
Markets appeared to react to news of the proposed second Scottish independence referendum and the imminent triggering of Brexit yesterday. The strange thing was they reacted a day after those two stories hit newswires.
On Monday Scottish First Minister Nicola Sturgeon announced plans to hold Scot indyref2 and UK Prime Minister Theresa May won the right to formally trigger Article 50, without having to give parliament greater choice over the eventual Brexit trade deal. And on Monday the Pound rallied slightly versus some of the majors. It seems that the bearish news took a little bit longer to have an impact on demand for Sterling.
It’s also possible that UK sentiment was hurt by news the new Bank of England Deputy Governor announced her resignation yesterday, due to a failure to disclose that her brother works in the strategy team at Barclays.
Euro
The Pound to Euro exchange rate slid by around a third of a cent yesterday, falling close to its lowest level in two months.
Data on the continent didn’t perform well – Eurozone industrial production printed at 0.6%, which underperformed expectations of 0.9% and German economic sentiment came in at 12.8, down on forecasts of 13.0 – suggesting that the move was related to the Scottish referendum and the impending triggering of Article 50.
US Dollar
Sterling tumbled by half a cent to hit a two-month low versus the US Dollar yesterday ahead of the Federal Reserve’s March policy meeting.
UK data is anticipated to be mixed this morning, with unemployment tipped to remain at an 11-year low of 4.8% and average earnings likely to slow from 2.6% to 2.4%. If wages continue to stutter as inflation surges, the Pound could struggle as growth prospects wane.
Across the pond in the US, inflation is predicted to jump from 2.5% to 2.7% and the Fed is highly likely to raise interest rates. Analysts believe that a March Fed hike is fully priced into the ‘Greenback’, which means that GBP/USD may avoid losses so long as the US central bank does not ramp up talk of future rate hikes this year.
Canadian Dollar
The Pound to Canadian Dollar exchange rate slumped to a fortnightly low yesterday as dank UK sentiment outweighed concerns over the crude oil market.
Oil prices declined in reaction to a report from OPEC suggesting that oil production outside of the cartel was likely to increase in 2017, which traders believe could go some way to equaling out the impact of last year’s agreed production cuts.
Australian Dollar
Despite a disappointing Australian business sentiment survey number yesterday, the ‘Aussie’ Dollar managed to rally by over half a cent against the embattled Pound.
The National Australia Bank (NAB) reported that business conditions dropped from 10.0 to 7.0 in February, which initially put a little bit of pressure on the Antipodean currency because the index is closely followed by the Reserve Bank of Australia. However, market-wide lack of demand for the Pound drove GPB/AUD lower later on in the day.
New Zealand Dollar
Sterling depreciated by around a cent versus the New Zealand Dollar yesterday, tumbling from a two-month high as the latest round of Brexit fears and the prospect of a second Scottish referendum dragged the UK currency lower.
Data Released
09:30 GBP ILO Unemployment Rate (3M) (JAN) Medium 4.8%
09:30 GBP Average Weekly Earnings (3M/YoY) (JAN) Medium 2.4%
12:30 USD Consumer Price Index (YoY) (FEB) High 2.7%
12:30 USD Advance Retail Sales (FEB) High 0.1%
18:00 USD FOMC Rate Decision (Lower Bound) (MAR 15) High 0.75%
18:00 USD FOMC Rate Decision (Upper Bound) (MAR 15) High 1.00%
18:00 USD FOMC Releases New Summary of Economic Projections (MAR 15) High