Pound Sterling Survives Soft Q2 UK GDP
The Pound avoided any significant losses yesterday, but did cede ground to some of the majors following the latest UK growth numbers.
The Office for National Statistics reported that the British economy grew by 0.3% in the second quarter, which was inline with market forecasts and minimally higher than the first quarter score of 0.2%.
On an annualised basis GDP cooled from 2.0% to 1.7%, as expected. Interestingly, it was the dominant service sector that contributed positively to the figure, with a 0.5% improvement, while industrial production shrank -0.4% and construction contracted -0.9%.
It appears that manufacturing exports are not benefitting heavily from the Pound’s 15-20% post-Brexit depreciation.
Pound to Euro Exchange Rate Flat as EUR/USD Soars
The Pound to Euro exchange rate fluctuated throughout yesterday’s session, however, the pair failed to make any lasting moves.
Demand for the single currency increased during the evening as EUR/USD rose 100 pips to a fresh two-and-a-half-year high. It seems that the Euro’s rally against the US Dollar dragged the single currency higher against Sterling too, however, this merely wiped out GBP/EUR’s earlier mild gains.
Pound to US Dollar Exchange Rate Touches 10-Month High
‘Cable’ rallied by around a cent yesterday evening to strike its joint-highest level for 10 months.
The Pound escaped unscathed from the morning’s soft UK GDP figures, although analysts said the 0.3% print had made it less likely that the Bank of England would act to hike interest rates anytime soon.
Expectations of a Federal Reserve rate hike were anchored at 0% coming into yesterday’s announcement from the central bank, so it will come as no surprise that the Fed left rates on hold at 1.00%-1.25%.
The accompanying policy statement cautioned that inflation was likely to remain ‘somewhat below’ the bank’s 2.0% target in the near-term and this prompted another round of US Dollar selling as rate hike bets receded.
Although the Fed currently forecasts a further 25-basis point rise in 2017, markets pushed back their expectations to suggest a 55% chance of the next rate hike taking place in March 2018 – this was down from 60% prior to the Fed communiqué.
Pound to Canadian Dollar Exchange Rate Moves Slightly Higher
Sterling ticked slightly higher versus the Canadian Dollar yesterday despite a rally on the oil market following news of a drawdown in US crude stocks.
US inventories fell by -7.2 million barrels last week, driving the price of crude above US$50 a barrel. The news lent the ‘Loonie’ a little bit of support but was not enough to drag GBP/CAD down to fresh five-month lows.
Pound to Australian Dollar Exchange Rate Loses Out Despite Soft Australian CPI
The Pound to Australian Dollar exchange rate rallied initially yesterday as Australian inflation cooled, however, GBP/AUD weakened by around half a cent later on in the day as BoE and Fed interest rate hike bets receded.
The latest Australian consumer price index report showed that price pressures dipped from 2.1% to 1.9% in the second quarter, which undershot expectations of 2.2% and subsequently weighed on demand for the ‘Aussie’. The Antipodean then went on to post gains throughout the day.
Pound to New Zealand Dollar Drops -100 Pips
Sterling tumbled by around a cent versus the New Zealand Dollar yesterday as soft UK growth numbers and reduced Federal Reserve rate hike bets drove GBP/NZD lower.
Data Released
USD Durable Goods Orders (Jun P)
USD Advance Goods Trade Balance (Jun)