Sterling
Sterling lost ground versus the majors on Friday as UK data printed negatively. Manufacturing and industrial production were both reported to have declined in February, while Bank of England Governor Mark Carney gave no indication that British interest rates were likely to rise anytime soon. Additionally, the UK trade deficit widened and the National Institute of Economic and Social Research estimated that UK growth moderated in the first quarter of the year.
On a monthly basis industrial activity declined -0.7%, while manufacturing output slid -0.1%. Both figures were markedly lower than traders had expected and therefore had a bearish impact on the Pound. Sterling was also hurt by the rising deficit, which hit a five-month high of £12.5 billion, and data suggesting that UK GDP slowed to 0.5% in the first quarter of the year, following a 0.7% jump in the final three months of last year.
Euro
The Pound to Euro exchange rate tumbled by a third of a cent on Friday as disappointing British data and a lack of hawkish intent from BoE Governor Mark Carney weighed on Sterling.
The single currency had softened on Thursday when European Central Bank President Mario Draghi played down the potential for tighter policy in the Eurozone anytime soon. But the Euro flourished against the Pound on Friday as a cascade of bearish UK data points were compounded by a cautious speech from the BoE Governor.
Carney spoke of the need for UK and EU banks to agree on new rules after Brexit, while vowing not to go down the road of protectionism, which he suggested would ultimately be less rewarding. Traders were also sensitive to the BoE Chief’s assertion that he had to be ready for a ‘hard’ Brexit. This was seen to suggest that uncertainty surrounding the UK-EU trade negotiations was likely to delay any potential rise in UK interest rates.
US Dollar
‘Cable’ plummeted -75 pips on Friday to hit a 20-day low as downbeat British data weakened Sterling.
The US Dollar, for its part, was fairly lucky to rack up such an impressive set of daily gains. The US non-farm payroll report for March came in at a 10-month low of 98,000, which massively undershot expectations of 180,000. The lowly figure reflected unseasonably cold weather in March, which impacted hiring patterns and halted economic activity in many parts of the country.
The NFP report even featured a worrying 30,000 decline in retail jobs last month, but a drop in the headline jobless rate appeared to insulate the ‘Greenback’ from any losses against the Pound. US unemployment fell from 4.7% to 4.5%, representing the lowest jobless rate since 2007.
Canadian Dollar
The Canadian Dollar also registered respectable gains versus the Pound on Friday. GBP/CAD tanked by over -120 pips to hit its lowest level since last month as oil prices rose 2% to touch a new one-month high in reaction to a US missile strike on Syria, which raised fears of disruption in the supply chain.
Data showed that job creation surged by 19,400 in Canada, almost quadrupling expectations of 5,700. The headline unemployment rate edged up from 6.6% to 6.7% but traders largely overlooked this because it was due to a rise in the number of people looking for work rather than a drop in the number of people in work.
Australian Dollar
Friday’s disappointing UK ecostats meant that the risk-sensitive Australian Dollar was able to rally by around a third of a cent against Sterling. The ‘Aussie’ lost out against some of the majors due to a spike in risk aversion on anxieties related to the US air strikes in Syria. Geopolitical concerns often hamstring the Antipodean currency but on this occasion it was the morning’s soft UK data prints that drove market sentiment in GBP/AUD.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate depreciated by around half a cent on Friday as sliding factory output figures in Britain, alongside a deceleration in GDP and a widening of the deficit, drove Sterling lower across the board.
Data Released
EUR Euro-Zone Sentix Investor Confidence (APR) Low 21