Sterling
Sterling softened slightly versus some of the majors on Friday as Bank of England rate hike expectations were tempered by dovish sentiments from BoE official Gertjan Vlieghe.
Vlieghe said that rising inflation would not necessarily lead to higher interest rates if it turns out that the main driver behind surging price pressures is the Pound’s post-Brexit depreciation. ‘It is not at all obvious what the impact for monetary policy would be and it might not have one’. Vlieghe also added that he would have to see signs of strong wage growth before voting for higher borrowing costs.
Euro
The Pound to Euro exchange rate slid by around -70 pips on Friday as comments on the possibility of interest rates remaining on hold even if UK CPI rose above 3.0% weighed on demand for Sterling.
Data out of the Eurozone showed that private sector growth hit a six-year high in March. The composite PMI index struck 56.7, up from 56.0 in February thanks to better-than-anticipated activity levels in both manufacturing and services.
With British Prime Minister Theresa May set to trigger Article 50 of the Lisbon Treaty this week, there is potential for a little bit of Sterling selling. However, the event has largely been priced in to currency markets and therefore the impact of the announcement should be fairly muted.
US Dollar
‘Cable’ slipped slightly on Friday due to moderated BoE rate hike bets, however, Sterling managed to push ahead versus the US Dollar on Sunday evening.
Although US durable goods orders printed at 1.7% for February on Friday afternoon, beating forecasts of 1.2%, the data was not enough to give the ‘Greenback’ a lasting lift.
Confidence in the US Dollar was compromised by President Donald Trump’s inability to pass legislation to repeal former President Barack Obama’s healthcare act. Although the healthcare bill is unlikely to have much of an impact on US monetary policy, the fact that members of Trump’s own Republican party voted against his proposal suggests that the President could encounter more troubles when trying to implement his plans for tax reform and fiscal stimulus. If these policies were also to hit roadblocks then it could effect US GDP forecasts, which in turn could put less pressure on the Federal Reserve to raise rates aggressively over the next few years.
Canadian Dollar
Sterling ticked slightly higher against the Canadian Dollar on Friday, with Canadian inflation printing slightly lower-than-anticipated. GBP/CAD struck a fresh three-month high before profit-taking eroded the Pound’s latest gains.
Canadian CPI came in at 2.0% in February, underwhelming estimates of 2.1%. This put a little bit of pressure on the ‘Loonie’, however, rumours that OPEC and non-OPEC nations might be planning to extend their production cut deal by a further six months helped to support the commodity-sensitive Canadian Dollar.
Australian Dollar
The Pound to Australian Dollar exchange rate fluctuated with little clear directional bias over the weekend. And, with no key ecostats due for release related to either currency in the first half of this week’s session, it is likely that GBP/AUD could remain range-bound over the next few days. The triggering of Article 50 could create some volatility, however, the telegraphed event is not expected to yield any large moves.
New Zealand Dollar
Sterling touched its highest level versus the New Zealand Dollar since the start of January on Friday morning, before succumbing to a daily decline of around half a cent. It seems that profit-taking and a slowdown in BoE rate hike bets were the reason for the dip.
Data Released
09:00 EUR German IFO – Business Climate (MAR) Medium 111.1