Sterling
It was another positive day for Sterling yesterday as events overseas weighed on some of the Pound’s most-traded currency peers.
The main event for Sterling traders today is the first quarter UK GDP report, which is anticipated to show a slowdown in quarterly growth from 0.7% to 0.4%. If market estimates are proved accurate then we could see a little bit of a pullback in demand for the Pound. However, Sterling’s losses shouldn’t stretch too far because the annualised growth print is tipped to have accelerated from 1.9% to 2.2% during the first three months of 2017.
Euro
The Pound to Euro exchange rate shot up by around a cent yesterday, striking Sterling’s strongest rate against the single currency since the results came in from the first round of the French Presidential election.
Amid speculation that policymakers at the European Central Bank were considering tapering quantitative easing, ECB President Mario Draghi told reporters yesterday that officials did not discuss removing the bank’s easing bias at this month’s meeting. Draghi noted that economic growth prospects were improving but concluded that ‘a very substantial degree of monetary accommodation [was] still needed for underlying inflation pressures to build up’. The dovish remarks drove the Euro sharply lower.
This morning sees a first estimate of Eurozone inflation for April and traders are primed for a rise from 1.5% to 1.8%. However, with core CPI lagging at 0.7% and only expected to jump to 1.0%, the Euro may struggle to catch a bid.
US Dollar
Sterling strengthened by around half a cent against the US Dollar yesterday to strike a fresh six-month high. On a technical basis, the latest leg of GBP/USD’s recent ascent was seen as a potentially significant marker that could preclude further rallies in favour of the Pound.
On Wednesday US Treasury Secretary Steven Mnuchin released Donald Trump’s much-vaunted tax reform plan. However, the one-page bullet pointed document was considered more a wish list than a serious piece of policy. Analysts noted that the proposed slashing of corporation tax from 35% to just 15% was very unlikely to pass through Congress seeing as there was very little information on how the President plans to fund the humongous reduction in tax earnings.
The report mentioned a one-time tax on ‘trillions of Dollars held overseas’, aimed at persuading US firms to repatriate their funds. Hypothetically, the influx of funds could drive the ‘Greenback’ higher but analysts were reluctant to bet on an outcome that, at this stage, looks very unlikely. The disappointing lack of details prompted a US Dollar selloff as traders continued to take Donald Trump’s grand proposals with a pinch of salt.
Annualised first quarter US GDP growth is predicted to come in at 1.0% this afternoon, less than half the previous quarter’s score of 2.1%, and we could see GBP/USD register further gains if the forecasts are accurate.
Canadian Dollar
The Pound to Canadian Dollar exchange rate surged over a cent yesterday and, in doing so, reached its highest level since last year’s Brexit referendum.
The ‘Loonie’ initially rallied on news of a U-turn from US President Donald Trump, who said that he was not now planning to rip up the North American Free Trade Agreement. However, the Canadian Dollar failed to hold onto its NAFTA related gains and GBP/CAD surged to new multi-month highs. Later this afternoon data is anticipated to show that annualised Canadian GDP rose from 2.3% to 2.6% in February, which could lend the embattled North American currency a little bit of a leg-up.
Australian Dollar
Sterling rallied by another cent versus the Australian Dollar yesterday, marking the 16th time in the last 21 sessions that GBP/AUD has registered daily gains. This bullish run has seen the Pound appreciate by around 10 cents versus the risk-sensitive ‘Aussie’ Dollar in April.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate leaped 150 pips yesterday and is currently trading at its highest level since last July. Fears that US President Donald Trump could slap tariffs on New Zealand milk exports are currently dragging the ‘Kiwi’ lower, while Sterling has remained sturdy since UK Prime Minister Theresa May called snap elections that many believe could help Britain achieve a better Brexit trade deal.
Data Released
09:30 GBP Gross Domestic Product (QoQ) (1Q A) Medium 0.4%
09:30 GBP Gross Domestic Product (YoY) (1Q A) High 2.2%
10:00 EUR Euro-Zone Consumer Price Index Estimate (YoY) (APR) High 1.8%
10:00 EUR Euro-Zone Consumer Price Index – Core (YoY) (APR A) High 1.0%
13:30 CAD Gross Domestic Product (YoY) (FEB) High 2.6%
13:30 USD Gross Domestic Product (Annualized) (1Q A) High 1.0%