Sterling
The Pound could rise this morning if the latest UK consumer price index climbs from 2.3% to 2.6% as expected. This would represent a fresh three-and-a-half-year high and anything above consensus could stoke Bank of England rate hike bets. Last week the UK central bank predicted that inflation would top out at 2.8% later on in the year and signalled that it did not intend to tighten policy. However, if price pressures were seen to be rising faster-than-forecast then it could persuade officials at the bank to rethink their policy plans.
Euro
The Pound to Euro exchange rate slid half a cent yesterday. A report from economic forecasting group EY ITEM Club, released yesterday, suggested that British unemployment could rise from the current multi-year low of 4.7% to 5.4% next year. It seems that this downbeat assessment dragged Sterling lower versus the single currency, even though the Pound was more resilient against some of the other majors.
We could see GBP/EUR bounce higher this morning if UK CPI data prints positively, while Eurozone GDP is tipped to have expanded 0.5% in the first quarter. The Euro is unlikely to pop on the figure, but a more robust number could drive demand.
US Dollar
‘Cable’ began yesterday’s session in fine form, racing to a 60-pip morning gain. However, demand for Sterling softened after that and GBP/USD ended flat on the day.
Data released yesterday showed that market bets against the Pound were reduced by the most in more than a year and the third most on record last week. It seems that speculators have given up trying to push the UK currency materially lower. The UK economy’s surprising resilience since the Brexit vote, coupled with surging consumer prices and early elections, has calmed market sentiment significantly.
Canadian Dollar
The Pound to Canadian Dollar exchange rate tumbled 70 pips yesterday as oil prices trended higher on news of further production cuts.
Oil is Canada’s largest export, which means the ‘Loonie’ often trades in tandem with the value of ‘black gold’. Crude prices have risen 13% in the last seven days and oil received another boost yesterday when Russia and Saudi Arabia backed plans to extend the current OPEC and non-OPEC production cut by a further nine months.
Australian Dollar
Sterling skidded to an 11-day low against the Australian Dollar yesterday as global risk sentiment favoured the commodity-correlated Antipodean. The oil production cuts, which prompted an uptick in crude prices, also increased appetite for other commodities and this benefitted the high-yielding ‘Aussie’ Dollar.
New Zealand Dollar
The Pound traded flatly against the New Zealand Dollar yesterday, declining in the morning but recovering by the end of the day. We could see GBP/NZD appreciate today if British inflation data comes in strongly, however, a disappointing number would surely drive Sterling lower.
Data Released
09:30 GBP Consumer Price Index (YoY) (APR) High 2.6%
10:00 EUR German ZEW Survey (Economic Sentiment) (MAY) High 22
10:00 EUR Euro-Zone Gross Domestic Product s.a. (QoQ) (1Q P) Medium 0.5%
10:00 EUR Euro-Zone Gross Domestic Product s.a. (YoY) (1Q P) High 1.7%
14:15 USD Industrial Production (APR) Medium 0.4%