Sterling
The Pound was treated to more positive data on Friday with UK factory orders printing at the highest level for over two years. The manufacturing index rose from +4 to +9 in May, indicating that new orders are continuing to surge despite Brexit uncertainties. Analysts suggested that the Pound’s post-referendum fall was helping make British manufacturing products more affordable to foreign buyers, however, it was noted that this sweet spot (benefitting from both a weak currency and tariff-free access to the single market) would not last forever.
However, Sterling softened across the board when markets reopened for this week’s session. It appeared to reflect concerns that the Conservatives’ lead over Labour had been cut from around 20-points to around 10-points. This brought a layer of uncertainty back into the equation, which seemed to weigh on UK sentiment.
Euro
The Pound to Euro exchange rate softened a little bit on Friday, with traders breathing a sigh of relief that Greek MPs backed a move to accept more austerity in exchange for €7.5 billion of financial aid.
The bailout funds, which will keep the embattled Hellenic nation solvent, should be confirmed later today. With all the headlines focusing on Brexit, and to a lesser extent: Frexit, the threat of Grexit has somewhat evaded the minds of currency traders over the past 12 months. But if leftist MPs in the ruling Syriza party hadn’t backed the latest batch of gruelling pension cuts and tax hikes then the possibility of Grexit would of ratcheted up to critical levels.
US Dollar
Sterling rose by around 80 pips against the ‘Greenback’ yesterday to trade close to eight-month highs as Trump anxieties weighed on the US Dollar.
The ‘Greenback’ has struggled over the past fortnight due to concerns that US President Donald Trump’s tax reform and infrastructure spending plans may not see the light of day if the controversial leader remains mired in scandal.
Also weighing on the US Dollar were comments from St Louis Federal Reserve President James Bullard, suggesting that the central bank must not act like it is on a pre-set course. The Fed has tightened policy once already this year and its projections point to another two rate hikes in 2017. However, Bullard noted that the Fed’s ‘contemplated policy rate path is overly aggressive relative to actual incoming data on US macroeconomic performance’. The dovish remarks compounded the US Dollar’s misery and helped Sterling rise through significant psychological resistance.
Canadian Dollar
The Pound to Canadian Dollar exchange rate jumped higher by around a cent on Friday afternoon as Canadian CPI data disappointed, however, the ‘Loonie’ later recovered as oil rose through the US$50 a barrel mark
The Canadian consumer price index remained at 1.6% in April, underwhelming expectations of 1.7%. This dampened the appeal of the North American currency as Bank of Canada rate hike bets were pushed back, but the commodity-sensitive ‘Loonie’ clawed back its losses by the end of the day thanks to a rally in crude prices.
Australian Dollar
Helped by the two-year high factory output print, Sterling strengthened by around 40 pips versus the Australian Dollar on Friday. Although GBP/AUD is around two cents weaker than the multi-month peak it struck two weeks ago, the Pound is still up by around 15 cents since the middle of March.
New Zealand Dollar
The Sterling to New Zealand Dollar exchange rate struck its highest level for over a week on Friday, rising by around a cent on the upbeat UK factory figures before falling back as investors locked in profit.