- Pound rallies – ‘Great Repeal Act’ boosts business sentiment.
- GBP/EUR hits March high – German CPI softens.
- ‘Cable’ remains below psychological support – Sterling rallies half a cent.
- GBP/CAD flat as oil prices spike – Crude hits 3-week high on OPEC extension hopes.
Sterling
The Pound performed well yesterday, racking up decent gains versus most of the majors in a further sign that all Brexit-related negativity has already been priced into Sterling. That’s not to say that the Pound doesn’t have further to fall; we could easily see Sterling start to slide again if the government’s EU trade negotiations take a turn for the worse.
Alternatively, the Pound could appreciate if Britain’s surprising economic resilience continues through the Brexit negotiation process.
Later this morning the Office for National Statistics is due to release its latest estimate of 2016 fourth quarter growth. The GDP report is tipped to show a quarterly expansion of 0.7% and an annual increase of 2.0%, in line with the previous estimates.
Euro
The Pound to Euro exchange rate surged higher by over a cent yesterday to strike its best level since the start of the month as slowing German inflation weighed on the single currency.
Price pressures in the currency bloc’s largest economy cooled from 2.2% to 1.6% in March, it was reported yesterday, disappointing forecasts of a milder dip to 1.9%. Energy and food remained key drivers behind the CPI index and it is likely that we could see a similar slowdown in this morning’s Eurozone wide inflation print. Traders are primed for Eurozone CPI to drop from 2.0% to 1.8%, but we could see the single currency stutter if the index decelerates more sharply.
The Pound’s gains came as Lloyd’s of London announced it would be relocating jobs to Brussels following UK Prime Minister Theresa May’s triggering of Article 50 on Wednesday. Dark mutterings suggested that the likes of Citigroup and JP Morgan were also considering moving out of London but the news did not trickle through to have a negative impact on the GBP/EUR exchange rate.
US Dollar
‘Cable’ appreciated by around half a cent yesterday, briefly breaking through psychological resistance but ultimately closing below a significant technical barrier.
British business confidence was improved by the government’s plan to launch the ‘Great Repeal Bill’ in May, which will involve transposing the mammoth list of EU laws into British law. Business leaders largely cheered the move, as it will give firms some sense of continuity that had previously been in question.
Across the pond in the US, GDP data for the final three months of last year showed sturdy growth of 2.1%, mildly exceeding analysts’ estimates of 2.0%.
Canadian Dollar
Sterling initially rallied versus the Canadian Dollar yesterday but gave up its gains later on in the day as oil prices moved higher.
The commodity-sensitive ‘Loonie’ was energised by news that OPEC was likely to extend its oil production cut deal in attempt to reduce oversupply in the markets, which drove crude up to a three-week high.
Later this afternoon we have a Canadian January GDP report scheduled. It’s anticipated to show a slight slowdown in annualised growth from 2.0% to 1.8%, which could put a little bit of pressure on the Canadian Dollar.
Australian Dollar
The Pound to Australian Dollar exchange rate grew by just under a cent yesterday as traders sent the Pound higher on hopes of a positive Brexit transition. The UK government’s ‘Great Repeal Bill’ to migrate laws helped, as did the conciliatory tone of Wednesday’s communications between Britain and EU leaders.
New Zealand Dollar
Sterling appreciated by around a cent-and-a-half yesterday against the New Zealand Dollar as investors brushed aside Brexit anxieties for the time being and bought into the British currency.
Data Released
13:30 CAD Gross Domestic Product (YoY) (JAN)
10:00 EUR Euro-Zone Consumer Price Index Estimate (YoY) (MAR)
09:30 GBP Gross Domestic Product (QoQ) (4Q F)
09:30 GBP Gross Domestic Product (YoY) (4Q F)