Sterling
With little fresh economic stimulus yesterday, the Pound gave back some of Wednesday’s gains, which had come as a result of the surprisingly strong UK service sector PMI print.
Looking ahead to today’s session and a speech from Bank of England Governor Mark Carney stands out as a potential market-mover. If Carney chooses to give any clues on future interest rate policy then we could see a strong response in the currency markets: any hawkish hints that higher inflation is ruffling feathers at the central bank could propel the Pound higher, while a focus on the ongoing slowdown in consumer activity could have a negative impact.
Also on the agenda we have industrial and manufacturing production reports for February. If Factory output is seen to have benefitted from the Pound’s 15-20% slide in the second half of 2016, which has made British exports more affordable to foreign buyers, then this would likely lend Sterling a leg-up. However, signs of domestic price rises impacting demand at home could have the opposite effect.
Euro
Sterling initially rallied by half a cent versus the single currency yesterday as dovish sentiment from ECB President Mario Draghi drove investors to sell the Euro.
Draghi said that growth risks in the Eurozone had ‘tilted to the downside’ but noted that despite ‘signs of progress, it is clearly too soon to declare success’. Draghi’s comments appeared to suggest that the central bank was prepared to maintain accommodative policy, at least until the end of the year. The Pound, however, failed to hold onto its early gains and GBP/EUR ended flat on the day.
US Dollar
The Pound to US Dollar exchange rate could soften slightly this afternoon if US non-farm payrolls follow March’s ADP employment change report in printing strongly. Although market rate hike expectations are anchored around the 50 pips mark for 2017, a robust NFP report could send a bullish message and prompt a surge in demand for the ‘Greenback’. Alternatively, a weaker-than-anticipated number could spark a US Dollar sell-off if question marks around President Donald Trump’s ability to pass bullish policies come back into focus.
Canadian Dollar
Oil prices hit a one-month high yesterday, which helped drive demand for the commodity-sensitive Canadian Dollar. A little bit of profit taking also played a part as GBP/CAD tumbled by over half a cent.
Australian Dollar
Following a sizeable appreciation on Wednesday, when the UK’s dominant service sector saw much higher growth than anticipated, the Pound cooled slightly against the Australian Dollar yesterday. Profit taking appears to be the main driver as Sterling softened by around -20 pips.
New Zealand Dollar
The New Zealand Dollar followed most of the majors in registering gains against Sterling yesterday with GBP/NZD sliding from a 2017 high. Today’s developments could push the Pound back up to those levels, however, if BoE Governor Mark Carney strikes a hawkish tone or if UK industrial production beats the market consensus.
Data Released
09:30 GBP Industrial Production (YoY) (FEB) Medium 3.7%
09:30 GBP Manufacturing Production (YoY) (FEB) Medium 3.9%
10:00 GBP BOE Governor Mark Carney Speaks in London High
13:30 CAD Unemployment Rate (MAR) High 6.7%
13:30 USD Change in Non-farm Payrolls (MAR) High 180k
13:30 USD Unemployment Rate (MAR) High 4.7%