Pound Sterling News: GBP/EUR, GBP/USD Exchange Rates Rally on 6-Year High UK Productivity

Pound Sterling Exchange Rates Perform Well as UK Productivity Hits 6-Year High

Pound Sterling (GBP) exchange rates performed well on Friday as soft data prints in the Eurozone and United States weighed on the Euro and US Dollar.

In the UK it was reported that British productivity growth hit a six-year high in the third quarter of 2017. The productivity figures point to a much-needed improvement, however analysts warned that, at just 0.9%, UK unemployment has basically flatlined since the financial crisis.

If the pre-crisis trend had (somehow) continued we would now be seeing productivity growth of around 20%.

Nevertheless, the six-year high figure appeared to prop-up demand for Sterling following the gloomy news that UK car sales declined -5.7% last year, the British car industry’s first annual fall for six years.

Pound to Euro (GBP/EUR) Exchange Rate Rallies as Eurozone CPI Slows

The Pound to Euro (GBP/EUR) exchange rate rallied by around 40 pips on Friday as a cooling of consumer prices in the Eurozone weighed on demand for the single currency.

As expected, the Eurozone CPI report for December showed a deceleration in price pressures from 1.5% to 1.4%. The core figure, which outstrips fuel and food prices, came in at 0.9%, confounding forecasts of 1.0%.

The region’s soft inflationary outlook means that the European Central Bank is unlikely to raise interest rates anytime soon. While ECB President Mario Draghi has committed to reconsider the bank’s asset purchasing target in September, the likelihood is that persistently undershooting inflation will persuade the ECB to maintain some level of QE for the duration of 2018.

Pound to US Dollar (GBP/USD) Exchange Rate Drifts Higher as US NFP Report Disappoints

The Pound rose slightly against the US Dollar (GBP/USD) on Friday as data pointed to a slowdown in US jobs growth in 2017.

The headline non-farm payroll score printed at 148,000 in December, down on 252,000 in November and lower than the median market consensus of 190,000.

Overall, the US economy added 2.05 million jobs in 2017, meaning that the American labour market actually witnessed its slowest annual growth rate since 2011 during Donald Trump’s first year as President. However, demand for the ‘Greenback’ remained buoyant as traders were consoled by news that the unemployment rate held firm at a 17-year low of 4.1%.

The healthy jobs markets means that the Federal Reserve could well hike rates three times, as it forecasts, in 2018. A rise in inflation could even prompt four rate rises.

Pound to Canadian Dollar (GBP/CAD) Exchange Rate Slides on Surprisingly Strong Canadian Jobs Report

The Pound to Canadian Dollar (GBP/CAD) exchange rate collapsed on Friday following the surprise news that Canadian unemployment tumbled from 5.9% to 5.7% in December.

The Canadian labour market registered gains of 78,600 last month, which smashed expectations of 2,000 and sent the headline jobless rate plunging. GBP/CAD skidded -130 pips to its lowest level in almost two months following the report.

Pound to Australian Dollar (GBP/AUD) Exchange Rate Jumps on Surprise Australian Budget Deficit

The Pound to Australian Dollar (GBP/AUD) exchange rate appreciated by around a third of a cent on Friday as disappointing Australian trade data poured cold water on near-term Reserve Bank of Australia rate hike bets.

The Australian trade data for November showed a deficit of –A$628 million, which undershot expectations of a A$550 million surplus.

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Touches New 6-Week Low

The Pound to New Zealand Dollar traded relatively steadily through Friday’s session, touching a fresh six-week low at one point.

The next influential New Zealand data is the nation’s house sales report for December, due tomorrow.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard