Sterling
Demand for the Pound remained soft on Friday as traders continued to mull over the Bank of England’s latest policy statement. With no policymakers opting to join Kristin Forbes in voting for tighter policy in May, analysts now believe that British interest rates will remain at rock-bottom levels until 2019. There had been talk prior to ‘Super Thursday’ of bank officials using the May meeting to prime markets for a potential rate hike later in the year. But despite UK inflation running at a three-year high and projected to rise further over the next few months, Britain’s weak wage outlook and uncertain economic future meant that BoE Governor Mark Carney was happy to kick the can down the road.
Euro
The Pound to Euro exchange rate tumbled by around half a cent on Friday as BoE rate hike bets receded and upbeat German data bolstered the appeal of the single currency.
Topping the podium of the G7 economies for GDP in the first quarter of 2017, Germany boasted quarterly growth of 0.6%. Mild weather helped boost construction projects, while household consumption and export trends were also notably positive. Comparing the well-oiled German economy to an effective and efficient car engine, one economist noted: ‘The economy seems to be firing on all cylinders’.
Data from the wider Eurozone showed that annualised industrial production activity accelerated from 1.4% to 1.9% in March. The result was not a roaring success, however, because traders had been hoping for faster growth of 2.3%.
US Dollar
Sterling started Friday’s session on the back foot as investors continued to sell the UK currency following the Bank of England’s uninspiring policy statement on Thursday. The Pound lost about half a cent during the morning but swiftly surged higher at the start of the Wall Street session in reaction to a couple of dud US ecostats.
With traders all geared up for a retail sales expansion of around 0.6%, the ‘Greenback’ found itself under selling pressure when the consumer spending indicator printed below consensus at 0.4% for April. The US Dollar was also impacted by news that American inflation slowed from 2.4% to 2.2% in March. GBP/USD recovered its losses following the softer-than-anticipated prints but market pricing still suggests a 74% probability of another Federal Reserve rate hike next month.
Canadian Dollar
The Canadian Dollar was another that failed to hold onto its gains versus the Pound on Friday. GBP/CAD touched a 10-day low at one point but traders appeared uncomfortable letting the ‘Loonie’ appreciate and profit-taking ultimately drove the Pound to a 20-pip daily gain. Investors are concerned that US President Donald Trump could be planning to unleash protectionist trade policies that would prove detrimental to the health of the Canadian economy.
Australian Dollar
The Pound lost out on around a third of a cent to the Australian Dollar on Friday as Sterling sentiment continued to feel the effect of Thursday’s BoE communiqué, which appeared to signal that interest rates would remain on hold for the foreseeable future.
New Zealand Dollar
GBP/NZD dipped half a cent on Friday, but a big drop in New Zealand house sales allowed Sterling to avoid any significant losses against the ‘Kiwi’ Dollar. It was reported that sales declined 9% in March, marking a 31% year-on-year deficit, and this proved a drag on demand for the New Zealand Dollar.
Data Released
14:00 CAD Existing Home Sales (MoM) (APR) Medium 1.1%