Pound Sterling Gains as UK Retail Sales Impress
The Pound raced ahead to early gains yesterday morning following sanguine UK retail sales data.
The latest retail report signalled that sales volumes increased by 1.0% last month, smashing forecasts of a 0.0% stagnation. The surprising resilience of UK consumers in the face of falling real wage growth (inflation overtaking earnings) drove the annualised figure up to 2.8% – double economists’ expectations of 1.4%. Non-food stores and online sales were the main drivers of growth during August.
Sterling rallied in a knee-jerk reaction to the result, as Bank of England rate hike bets surged.
Pound to Euro Exchange Rate Jumps Ahead of ECB Draghi Speech
The Pound to Euro exchange rate strengthened by around 80 pips yesterday as surprisingly strong UK retail sales figures bolstered November BoE rate hike bets.
Later this afternoon European Central Bank (ECB) President Mario Draghi is due to speak in Frankfurt. If the ECB Chief gives off the impression that the bank is planning to begin winding down its stimulus programme later this year then the single currency would likely soar on the currency markets. On the other hand, a more cautious message, or any hints that further asset purchases are possible, could prompt a selloff in the Euro.
GBP USD Briefly Strikes New 14-Month High as Fed Hints at Third 2017 Rate Hike
‘Cable’ leapt yesterday morning, rallying around 90 pips and coming within a fraction away from striking a fresh 14-month high.
And during the evening GBP/USD did hit a new 14-month high, albeit only for a matter of minutes. The Pound rocketed higher by around half a cent when the Federal Reserve announced that it was leaving interest rates on hold in September and cut its 2019 rate forecast from 2.9% to 2.7%.
However, demand for the ‘Greenback’ recovered shortly after the initial move, and GBP/USD weakened on the day, as traders digested the US central bank’s latest ‘dot plot’ projection graph, which still points to one more rate hike in 2017 and a further three in 2018.
Market expectations for a December rate hike increased from 52% to 73% following the statement. The US Dollar also benefitted from the Fed’s signal that it would begin unwinding its $4.5 trillion balance sheet next month.
Pound to Canadian Dollar Exchange Rate Rallies as UK Retail Sales Print Strongly
The Pound to Canadian Dollar exchange rate rose by around half a cent during the London session as robust UK retail sales figures drove Sterling higher.
The commodity-correlated ‘Loonie’ managed to avoid further defeats during the afternoon, when US crude supplies were reported to have risen 4.6 million barrels, because optimism is running high in oil markets due to recent news suggesting that oil producers are adhering to the OPEC-led production curbs.
Pound to Australian Dollar Exchange Rate Suffers as Risk Sentiment Bolsters ‘Aussie’
Despite an initial surge following the morning’s upbeat UK retail report, Sterling softened by around half a cent versus the Australian Dollar yesterday as risk sentiment favoured the high-beta ‘Aussie’. However, GBP/AUD did stage a mini recovery during the evening as risk appetite was dealt a blow by the prospect of another 2017 Fed rate hike and the imminent unwinding of the US central bank’s balance sheet.
Pound to New Zealand Dollar Exchange Rate Depreciates -100 Pips on Latest Election Poll
The Pound to New Zealand Dollar exchange rate skidded to a one-cent daily depreciation yesterday morning in response to New Zealand election news.
The latest opinion poll gave the governing National Party a commanding 11-point lead in the run-up to this weekend’s general election. The news bolstered the appeal of the ‘Kiwi’ as it was seen to lessen the chances of messy coalition discussions and other forms of political uncertainty.
Data Released Today
09:30 GBP Public Sector Net Borrowing (Pounds) (AUG)
14:30 EUR ECB President Mario Draghi speaks in Frankfurt