Sterling
The Pound performed well against the majors yesterday, registering solid gains across the board. There were no dramatic shifts in UK economic sentiment but there was a marked deterioration of confidence in the US, which drove GBP/USD higher and boosted Sterling versus its most-traded currency peers.
Wednesday is set to see British Prime Minister Theresa May trigger Article 50 of the Lisbon Treaty, thereby formally requesting to leave the European Union. Most traders expect the event to go by smoothly. However, there are some who believe that the start of a difficult negotiating period could inflict some downward pressure on the Pound. Others posit that by removing one small layer of uncertainty around the British economy, the official Brexit announcement could actually stoke demand for Sterling.
Euro
The Pound to Euro exchange rate improved by around a third of a cent yesterday despite encouraging data out of the currency bloc’s largest economy.
March’s trio of German IFO surveys showed that business, climate, expectations and current assessment indexes all strengthened this month. The upbeat surveys showed that, despite upcoming general elections and Britain’s imminent exit from the EU, German business morale rose to its best level in almost six years in March. Rising demand for German cars and machinery contributed to the robust figures.
US Dollar
The Pound spiked half a cent yesterday, hitting its highest level for almost two months on fears that US President Donald Trump may not be able to follow through on campaign pledges.
Trump’s failure to pass a healthcare reform bill set off alarm bells and prompted a large selloff in US stocks and the Dollar. Traders are concerned that divisions within the ruling party could scupper the President’s plans to inject massive fiscal stimulus and reform taxes in order to boost economic output. After securing a majority in both the House of Representatives and the Senate, it was believed that the Republican party would allow their leader, Donald Trump, to press ahead with his ambitious policies. This sent stocks soaring. However, this trend, the so-called ‘Trump trade’, appears to be faltering and some analysts reckon there is further for the ‘Greenback’ to fall.
GBP/USD hit a near-two-month high yesterday, rallying above longstanding technical and psychological support. However, over the past four months ‘Cable’ has struggled to push ahead from this level and there is potential for the Pound to soften.
Canadian Dollar
Sterling rallied by over a cent yesterday to hit its highest level since the start of December. The commodity sensitive ‘Loonie’ was driven down by lower oil prices but could catch a bid this afternoon if Bank of Canada Governor Stephen Poloz strikes an optimistic tone in a scheduled press conference. The BoC currently holds a neutral outlook for interest rates.
Australian Dollar
The Pound to Australian Dollar exchange rate jumped higher by around 150 pips yesterday to strike its highest level since the start of February. However, Sterling’s gains were trimmed by the end of the day, leaving GBP/AUD up by just over half a cent. The ‘Aussie’ was hurt by global risk aversion and a dip in demand for its most lucrative commodity, iron ore.
New Zealand Dollar
The Pound struck its highest level since Boxing Day against the New Zealand Dollar yesterday as dampened risk sentiment, due to the reversal of the so-called ‘Trump trade’, weighed on the ‘Kiwi’.
Data Released
17:50 USD Fed Chair Janet Yellen Speaks High
16:10 CAD Bank of Canada Governor Stephen Poloz Press Conference Medium
15:00 USD Consumer Confidence (MAR) High 114.0