Sterling
Better-than-forecast UK retail sales numbers allowed Sterling to rally across the board yesterday. Smashing estimates of 0.4%, sales volumes rebounded 1.4% in February following a -0.5% contraction in the first month of the year. The robust monthly print took the annualised figure up from 2.1% to 4.1%.
Although analysts questioned the sustainability of the pickup in retail activity, considering that wage growth is plateauing and inflation is rising, the Pound gained on the sanguine report. If Britain’s army of avid consumers do continue to boost the economy, despite rising prices, it will put serious pressure on the Bank of England to start hiking interest rates sooner rather than later.
Euro
The Pound to Euro exchange rate strengthened by around half a cent to hit a 20-day high yesterday on the back of the surprisingly resilient UK retail sales report.
British economic sentiment was also helped by a car manufacturing report showing that production increased 8% in February, with one car rolling out of the production line every 16 seconds. 153,041 cars were built, marking the strongest February in 17 years. Interestingly, 78% were shipped off to be sold abroad, which raised concerns among industry experts that the sector could fall back over the next few years if firms are hit with trade tariffs after Brexit.
On the agenda this morning we have a series of Eurozone PMI reports, which are anticipated to show that private sector activity remained sturdy this month, but are unlikely to give the single currency a material boost.
US Dollar
Sterling rallied 40 pips to strike a monthly high versus the US Dollar yesterday as impressive UK retail numbers kept hopes of a 2017 Bank of England rate hike alive.
The ‘Greenback’, meanwhile, struggled to attract support following Federal Reserve Chairwoman Janet Yellen’s latest public address. Yellen made no reference to monetary policy, instead focussing on how to educate children and young adults for future success in the labour market. This disappointed traders who had hoped for some further clues on US monetary policy.
Later this afternoon we have the US durable goods report for February, which is liable to show a slight deceleration in output, from 2.0% to 1.2%.
Canadian Dollar
The Pound to Canadian Dollar exchange rate struck a three-month high yesterday as sanguine UK consumer data bolstered Sterling’s appeal. The commodity-sensitive ‘Loonie’ was hit by a third day of declines in the oil market. However, we could see GBP/CAD driven lower during today’s session by a mixture of profit-taking and an expected 2.1% result from the Canadian consumer price index report.
Australian Dollar
Sterling appreciated by over a cent yesterday to strike a five-week high against the Australian Dollar as surprisingly strong British retail data reflected positively on the UK economy. There are serious concerns regarding Britain’s ability to maintain its relatively impressive performance since last June’s referendum vote, but reports such as yesterday’s gave UK traders hope.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate rallied by around 80 pips to hit its highest level since the first week of 2017 yesterday. The only New Zealand data on the day showed that the Antipodean nation ran a trade deficit of NZ$-18 million last month, which had only a minimal impact on the ‘Kiwi’ Dollar.
Data Released
09:00 EUR Markit Eurozone Composite PMI (MAR P) Medium 55.8
12:30 USD Durable Goods Orders (FEB P) High 1.2%
12:30 USD Durable Goods Orders (FEB P) High 1.2%