Sterling
The Pound underwent a tremendous shift yesterday. Not in value, it’s value only changed a little bit, but in shape. The Royal Mint released its new 12-sided, bimetallic Pound coin complete with holographic, micro-lettered and top-secret security features. Yes, one of the Pound’s new security features is so revolutionary that its makers have opted to leave it shrouded in mystery. Apparently one in 30 of the old round Pounds were counterfeit but the new model is heralded as the ‘most secure coin in the world’.
Despite the extensive safeguarding efforts of the Royal Mint, the Pound dropped in value versus most of the majors yesterday. Following a bumper day of gains on Monday, the move lower appeared to be motivated by profit-taking rather than any significant shifts in sentiment – or the introduction of the new Pound coin for that matter.
Euro
UK Prime Minister Theresa May is due to officially notify the European Union of Britain’s decision to trigger Article 50 of the Lisbon Treaty today. Though the upcoming rollercoaster ride of Brexit negotiations are liable to buffet the Pound to Euro exchange rate over the next few years, the actual announcement is unlikely to have a massive impact on Sterling. We could see GBP/EUR slide a little bit if some investors use the day as an opportunity to hedge against future volatility. But on the other hand we could actually see the Pound rally if markets interpret the news as the removal of one more element of uncertainty.
The Pound to Euro exchange rate slid by around a third of a cent on the day. A statement from Bank of England policymaker Ian McCafferty late in the day did little to support Sterling, however, the bulk of the Pound’s losses took place before the central banker’s input. McCafferty suggested that the UK was likely to experience a ‘slow-motion slowdown’ rather than a sharp recession following Brexit, and argued that the economy was not currently strong enough to handle a rate rise.
US Dollar
The Pound tumbled by over half a cent against the US Dollar yesterday, sinking below psychological support as investors locked in profit following the two-month high struck on Monday.
The ‘Greenback’ benefitted from a stellar US consumer confidence score of 125.6, which smashed forecasts of 114.0 and marked the most optimistic score since December 2000. The incredible score reflected a significant pickup in the short-term outlook for business, jobs and personal income prospects.
Canadian Dollar
Sterling depreciated by around -120 pips against the Canadian Dollar yesterday. Sterling was down versus most of the majors, but its losses were particularly steep against the commodity-correlated ‘Loonie’, which garnered support following news of a severe disruption in the Libyan oil fields. Crude jumped 2% on the news that armed factions had blocked supply lines, leading to an output deficit of around 252,000 barrels per day.
Bank of Canada Governor Stephen Poloz claimed that higher interest rates at this juncture could tip the domestic economy into recession, but the dovish remarks did not have a negative impact on the ‘Loonie’.
Australian Dollar
The Pound to Australian Dollar exchange rate briefly touched a fresh two-month high yesterday morning. However, a raft of profit-taking stances kicked in later in the day, driving GBP/AUD lower by around -150 pips.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate hit its highest peak since before Christmas yesterday morning. However, the advent of the new Pound coin did not mark a strong day for Sterling on the currency markets and GBP/NZD tanked by around -150 pips during the London session.
Data Released
GBP UK PM May Triggers Article 50, Starting Brexit Process High