Market Reluctance to Buy US Dollar Benefits Pound Sterling
Pound Sterling was on strong form yesterday as widespread weakness in the US Dollar boosted demand for the stable UK asset.
This was despite a lack of scheduled releases on the UK data calendar, although a survey released by the Bank of England (BoE) showed that businesses were expecting to hike worker pay by 3.1% during 2018; enough to push real wages back into growth territory.
Today’s retail sales figures could help improve the outlook for the UK economy given the forecasts are for strong growth in January compared to the performance seen in December.
GBP/EUR Exchange Rate Rises as Euro Ignores Strong Trade Surplus Data and ECB Speeches
The GBP/EUR exchange rate recorded solid gains yesterday, with the Euro largely unaffected by the day’s economic data releases.
The latest Eurozone trade balance figures for December showed a larger-than-expected rise in the surplus, thanks to exports rising at nearly double the pace of imports towards the end of 2017.
The day held three speeches from members of the European Central Bank (ECB), but neither Yves Mersch, Peter Praet nor Lautenschläger said anything that affected the monetary policy outlook.
Rising Fears of US Inflation Allow GBP/USD Exchange Rate to Gain
The US Dollar slid lower yesterday on the back of stronger producer price data that points to further inflationary pressure in the future.
Also weighing on USD were disappointing domestic data releases. As well as initial and continuing jobless claims figures clocking in higher-than-expected, the latest empire manufacturing index, Philadelphia Fed business outlook measure and industrial and manufacturing production figures all disappointed forecasts.
The University of Michigan consumer sentiment index is set for release today.
The measure is set to decline marginally to 95.5, which is unlikely to be a big enough change on the previous month to alter current attitudes towards the US Dollar.
GBP/CAD Races Higher As Market Concern over US Oil Production Weighs on Crude Prices
Despite a positive non-farm payroll report from ADP and widespread weakness in the US Dollar, the Canadian Dollar slumped yesterday.
GBP/CAD gained around 0.7% as the ‘Loonie’ tumbled. The ADP report showed an increase in employment of over 10,000, but later existing home sales showed a huge -14.5% decline in January.
Markets were concerned about the extent of US oil production and stockpiles, which weighed on the price of crude oil and kept CAD on the decline.
Canadian manufacturing sales data is expected to show a large slowdown month on month, so the Canadian Dollar could be set for a decline even if fears in the oil markets have weakened.
US Producer Prices Data and Week Australian Jobs Figures Paved the Way for GBP/AUD Gains
The GBP/AUD exchange rate gained over 1% yesterday, as global market risk appetite was extinguished by US producer prices data that showed a sharper than expected uptick in input costs and therefore threatens further inflationary pressures.
The Australian Dollar was not helped by disappointing set of employment data, which saw December’s employment rate revised down and the unemployment rate revised up, as well as a large drop in the number of people in full-time employment compared to a large rise in part-time employment.
GBP/NZD Exchange Rate Gains as Week Global Risk Appetite Weighs On ‘Kiwi’
The GBP/NZD exchange rate recorded some strong gains yesterday, although the New Zealand Dollar got off the lightest out of the commodity currencies.