Pound Drifts Higher Across the Board
After a run of losses versus the Euro and some of the other majors, Sterling managed to post a modest set of daily gains yesterday.
British data showed that mortgage approvals rose unexpectedly from 65,318 in June to 68,689 in July. The figure surprised traders, as house buying traditionally slows during the summer. A separate report showed that British consumer credit cooled slightly last month, with credit card, overdraft and personal lending growth slipping to a one-year low of 9.8%. The mild downtick could relieve a little pressure on the Bank of England to raise interest rates in order to keep consumer borrowing under control. And, with inflation overtaking wage growth, a drop-off in loans could also lead to reduced household spending and consequently subdued GDP growth.
Pound to Euro Exchange Rate Rallies Half a Cent
The Pound to Euro exchange rate rallied by around half a cent yesterday as markets locked in profit from the recent eight-year low. The big event to look out for today is the Eurozone consumer price index report, which is tipped to rise from 1.3% to 1.4%. Anything above 1.4% could give European Central Bank tightening bets a boost, whereas anything below 1.3% could drag on demand for the single currency.
Investors said that on a valuation basis Sterling was starting to look attractive, however, it was noted that many traders were still steering clear of the currency due to its susceptibility to negative Brexit headlines.
Holders of the Pound were treated to one such headline yesterday but it did not lead to any fresh downward pressure on Sterling. Brussels officials poured cold water on British hopes of going over the European Commission’s heads to negotiate a new trade deal ahead of schedule with German Chancellor Angela Merkel and French President Emmanuel Macron. The EU stance is that no trade talks can commence until the divorce bill and the rights of EU citizens are settled. However, British ministers would prefer to discuss the future trade deal sooner and had planned to hold one-on-one talks with key European leaders.
An official from Brussels dismissed the notion, pointing to a statement from the European Council that forbids such discussions: ‘so as not to undercut the position of the Union, there will be no separate negotiations between individual member states and the United Kingdom’.
Pound to US Dollar Exchange Rate Stutters as US GDP Impresses
The Pound failed to land any gains against the US Dollar yesterday, with sentiment towards the ‘Greenback’ boosted by a better-than-anticipated second quarter growth print.
The Q2 GDP figure came in at 3.0%, beating expectations of 2.7% and more than doubling the 1.2% rate of growth recorded in Q1. The report featured strong numbers in private inventory investment, federal government spending and personal consumption, which took the annual rate of growth up to US President Donald Trump’s 3.0% target. However, analysts warn that unsustainable consumer spending trends in Q2 suggest that the world’s largest economy will not hit its target come the end of 2017.
Pound to Canadian Dollar Exchange Rate Hits 12-Day High Ahead of Canadian GDP Report
The Pound to Canadian Dollar exchange rate surged to a 12-day high yesterday as demand for the commodity-sensitive ‘Loonie’ continued to slide due to falling oil prices.
Oil tumbled -1% as Tropical Storm Harvey forced more oil refineries on the US Gulf Coast to shutdown. Over 20% of US refinery capacity is currently closed, which has led to a buildup of crude supplies and subsequently pushed prices lower.
This afternoon we could see further recovery in GBP/CAD if the Canadian year-on-year growth rate softens from 4.6% to 4.1% as expected. Monthly Canadian GDP is tipped to have decelerated from 0.6% to 0.1% in June.
Pound to Australian Dollar Exchange Rate Rises 100 Pips
The Pound to Australian Dollar exchange rate increased in value by around a cent yesterday, alerting technical traders to the possibility that GBP/AUD could be on the verge of a bounce higher. The pair entered a downtrend in May and has since shed -13 cents, however, yesterday’s rally opens the possibility to a sustained rebound and it will be interesting to see whether Sterling manages to register further gains versus the ‘Aussie’ over the next few days.
Pound to New Zealand Dollar Exchange Rate Hits 5-Week High Following RBNZ Jawboning
Sterling soared higher by around 140 pips against the New Zealand Dollar yesterday to strike a five-week high. The high-beta ‘Kiwi’ lost support following comments from Reserve Bank of New Zealand Governor Graeme Wheeler, who said that a weaker domestic currency was needed to support the export sector and spur inflation. The verbal jawboning had its desire effect, sending the ‘Kiwi’ spiralling lower across the board.
Data Released Today
10:00 EUR Euro-Zone Unemployment Rate (JUL) 9.1%
10:00 EUR Euro-Zone Consumer Price Index Estimate (YoY) (AUG) 1.4%
13:30 CAD Gross Domestic Product (MoM) (JUN) 0.1%
13:30 CAD Gross Domestic Product (YoY) (JUN) 4.1%
13:30 USD Personal Consumption Expenditure Core (YoY) (JUL) 1.4%