Pound Sterling (GBP) Posts Quarter-end Gains as GDP Meets Expectations
Sterling posted subtle gains against most of the majors on Friday as traders settled quarter-end currency requirements. The Pound rallied across the board late in the London session to complete a 3.2% appreciation against the US Dollar in the second quarter, making it Sterling’s best quarterly performance for two years.
Data released by the Office for National Statistics on Friday confirmed that the British economy grew at a quarterly pace of 0.2% and an annualised rate of 2.0% during the first three months of 2017. The results were inline with market expectations. A subdued service sector expansion of 0.2% was seen by economists as leaving the door open to a potential rate hike from the Bank of England, but was not strong enough to really make the case for an immediate dose of monetary tightening.
GBP/EUR Hits 10-Day High as Eurozone Inflation Slows
The Pound to Euro exchange rate rallied by around a third of a cent to strike a 10-day high on Friday as traders settled positions ahead of the transition from the second to the third quarter.
The UK’s latest GDP report was interpreted as a neutral signal, however, some analysts voiced concerns that UK consumer spending trends could suffer going forward as a result of the continued erosion of disposable incomes. The ONS reported that household disposable income, adjusted for inflation, declined for the third quarter in a row at the start of the year, which was the worst run since the 1970s.
In Europe, data signalled that price pressures receded in June, but not as sharply as anticipated. Eurozone CPI slowed from 1.4% to 1.3%, beating estimates of 1.2%. This was also seen as a neutral signal.
The single currency could gain ground in the coming days and weeks if the European Central Bank decides to start winding down its stimulus schemes. Indeed, over the weekend ECB official and German Bundesbank President Jens Weidmann said that the bank is looking at ways to move away from ultra-loose policy. If additional ECB policymakers start employing hawkish rhetoric then we could see the Euro rise on stimulus removal hopes.
GBP/USD Strikes 5-Week High
The Pound to US Dollar exchange rate strengthened on Friday to strike a five-week high.
Sterling registered mild gains against the US Dollar on the last day of June to mark a 3.2% quarterly appreciation in Q2. The Pound’s strong quarterly performance appears to have been caused by two main factors: an apparent hawkish shift in BoE outlook and a winding down of the Trump trade as investors lost faith in the US President’s ability to push through his growth-boosting economic policies.
The latest data out of the US showed that personal incomes rose 0.4% in May but that personal spending softened from 0.4% to 0.1%. Additionally, the PCE measure of US inflation dipped from 1.5% to 1.4% and the University of Michigan consumer confidence index rose from 94.5 to 95.1. The mixed data stream failed to lift or reduce demand for the ‘Greenback’.
Pound to Canadian Dollar Exchange Rate Flat as BoC Rate Hike Bets Mount
The Pound to Canadian Dollar exchange rate held fairly steady through Friday’s session as sturdy growth figures propped-up Bank of Canada rate hike hopes.
On a monthly basis the Canadian economy expanded 0.2% in April, as expected, while on a yearly basis the North American nation posted GDP growth of 3.3%, up from 3.2% previously. The on-target figures appeared to corroborate BoC Governor Stephen Poloz’ recent claim that the rate cuts introduced in 2015 have done their job, and this bolstered the appeal of the ‘Loonie’ as rate hike bets mounted.
GBP/AUD Static Ahead of UK Manufacturing PMI
Sterling ticked a little higher versus the Australian Dollar on Friday ahead of a key British manufacturing report due for release today. Markets are primed for the UK factory output PMI to print at 56.3 in June, which would represent a solid score in the final month of Q2. Also on the agenda is a speech from Bank of England Governor Mark Carney on financial stability, which could drive sentiment towards Sterling if Carney drops any hints about monetary policy.
GBP/NZD Surges to 3-Week High on Upbeat BoE Rhetoric
The Pound to New Zealand Dollar exchange rate remained close to three-week highs on Friday as quarter-end trading requirements benefitted Sterling across the board.
Data Released
09:30 GBP Markit UK PMI Manufacturing SA (JUN)
10:00 EUR Euro-Zone Unemployment Rate (MAY)
13:00 GBP BOE Governor Mark Carney Provides Update on FSB Work
15:00 USD ISM Manufacturing (JUN)