Pound Sterling Registers Mild Gains Following UK Q2 GDP
The Pound rallied initially yesterday morning when data showed that British growth inched up from 0.2% to 0.3% in the second quarter of the year.
However, Sterling struggled to hold onto its gains through the session as traders delved into the data and took a negative outlook. Investors were concerned by a deceleration in business investment from 0.6% in Q1 to 0.0% in Q2 and a notable dip in consumer spending to a two-and-a-half-year low of 0.1%.
Analysts blamed the drop-off in business investment on uncertainty created by Brexit, while the softer consumer spending figures were seen to represent the logical outcome of falling real wage growth (wages rising slower than inflation).
Pound to Euro Exchange Rate Close to 8-Year Low Ahead of Draghi’s Jackson Hole Speech
The Pound to Euro exchange rate rebounded from an eight-year low yesterday, rallying by around half a cent in reaction to the second quarter UK GDP report.
However, GBP/EUR failed to hold onto its gains and Sterling found itself languishing close to multi-year lows by the end of the day. Markets are counting on a hawkish message from European Central Bank President Mario Draghi during his speech at the Jackson Hole symposium.
The single currency could appreciate on talk of tapering the ECB’s quantitative easing scheme, but there is also a possibility that GBP/EUR could bounce higher if traders are disappointed with Draghi’s efforts.
Indeed, reports suggest policymakers at the ECB are concerned with the Euro’s recent rise, as they believe it could impact their efforts to drive inflation higher in the bloc, which could prompt Draghi to convey a wait-and-see approach. Under this scenario we could see GBP/EUR break higher.
Pound to US Dollar Exchange Touches Fresh 2-Month Low
‘Cable’ touched a fresh two-month low yesterday morning but managed to register a mild set of daily gains thanks to a slight uptick in UK GDP in the second quarter. Concerns over negative real wage growth and Brexit prevented Sterling making any significant inroads against the US Dollar.
GBP/USD looks set for further losses if Federal Reserve Chairwoman Janet Yellen uses her speech at the Jackson Hole symposium to prepare markets for another rate hike before the end of the year. Any further talk of winding down the Fed’s asset sheet could also bolster the appeal of the ‘Greenback’.
On the other hand, there is some hope for the Pound as a more cautious approach from the Fed chief could drive ‘Cable’ higher.
Pound to Canadian Dollar Near 7-Month Low
Despite a three-cent plunge in oil prices, the Pound remained close to its worst level in seven months against the commodity-correlated Canadian Dollar yesterday.
Oil tumbled as refineries in the US shutdown ahead of Tropical Storm Harvey, which is expected to turn into a major hurricane and hit the US Gulf Coast over the next few days.
Usually falling oil prices would give Sterling a leg-up against the ‘Loonie’, but at this juncture market sentiment is too weak towards the UK currency and the Pound remained at depressed levels.
Pound to Australian Dollar Exchange Rate Remains Close to 5-Month Low
Although the Pound managed to jump over half a cent in the morning yesterday, following the Q2 UK GDP numbers, the Sterling to Australian Dollar exchange rate softened later on in the day and remains close to its lowest level for five months.
GBP/AUD could rise if global risk sentiment is hurt by hawkish ECB and Fed speeches later today, while dovish messages from the two giants of central banking could put the ‘Aussie’ on the front foot.
Pound to New Zealand Dollar Exchange Rate Rises 30 Pips
For the second day in a row, Sterling managed to rally versus the New Zealand Dollar yesterday. GBP/NZD appreciated by around a third of a cent following the British GDP report.
Data Released Today
09:00 EUR German IFO – Business Climate (AUG) Medium 115.5
13:30 USD Durable Goods Orders (JUL P) High -6.0%
15:00 USD Yellen speaks at Fed Conference in Jackson Hole, Wyoming High
20:00 EUR ECB President Mario Draghi speaks in Jackson Hole High