Surprise UK Quarterly GDP Downgrade Weakens Pound Sterling Exchange Rates
Pound Sterling was largely on weak form yesterday, after the second estimate for 2017 fourth quarter UK GDP was unexpectedly revised lower by the Office for National Statistics (ONS).
Quarter-on-quarter growth was revised down from 0.5% to 0.4%, while year-on-year growth was cut from 1.5% to 1.4%.
This undermined hopes that the Bank of England (BoE) will vote to hike interest rates in May.
BoE Deputy Governor Sir David Ramsden will give a speech on productivity today; this has been a key issue for the UK economy so if he sounds optimistic on output growth the Pound could make gains.
GBP/EUR Exchange Rate Insipid despite Cautious ECB Meeting Minutes
The GBP/EUR exchange rate weakened yesterday, despite a disappointing set of meeting minutes from the European Central Bank (ECB) January policy meeting.
It had been hoped that the Governing Council would soon begin to shift the tone of its monetary policy communications in an attempt to gradually prepare markets for the eventual end of QE and tightening of interest rates.
However, the minutes show policymakers rejected the notion of making even the slightest of changes, revealing that they are still worried by the sluggish pace of inflation within the currency bloc.
There is a slew of finalised Eurozone data due for release today, as well as German consumption, government spending and capital investment data, which could boost the Euro if it shows that the currency bloc economy continues to see its private sector and government investing in the domestic economy.
GBP/USD Exchange Rate Edges Higher; FOMC not Upbeat Enough for Markets
Pound Sterling was able to make even mild gains versus the US Dollar yesterday, with USD slumping against many of its major currency peers despite a confident set of meeting minutes from the Federal Open Market Committee’s (FOMC) January policy gathering.
The US Dollar broke a long-term downtrend at the end of January after the initial communications from the Federal Reserve indicated that there could even be four rate hikes this year, but the FOMC meeting minutes were not quite confident enough to prevent markets fearing they may only be three hikes.
Fed officials William Dudley, Eric Rosengren and John Williams are due to speak today. It is unlikely they will say anything that was not covered by yesterday’s meeting minutes, however.
GBP/CAD Avoids Losses Thanks to Poor Canadian Retail Sales Data
Poor Canadian retail sales data from December pushed the Canadian Dollar lower yesterday, meaning the beleaguered Pound was able to scrape some gains.
Sales posted a shock decline of -0.8% month-on-month, compared to forecasts of stagnation, while sales excluding autos dropped to -1.8% against forecasts for 0.3% growth.
Canadian consumer price data is set for release today; another disappointment could send CAD tumbling.
GBP/AUD Exchange Rate Slumps as Markets Sell US Dollar
The Australian Dollar was supported yesterday by the weakening US Dollar and the fact that the vital FOMC meeting minutes had not been quite convincing enough to see markets overwhelmingly pricing in more US rate hikes than they were initially prepared for anyway.
The weak Canadian Dollar also removed some competition for high risk assets, which helped push the GBP/AUD exchange rate down half a percent.
GBP/NZD Slides as New Zealand Dollar Benefits from USD Weakness
Like the Australian Dollar, the New Zealand Dollar was on strong form yesterday, so the GBP/NZD exchange rate was pushed lower.
Markets have been worried that the latest FOMC meeting minutes would suggest a faster-than-expected pace of monetary tightening (likely meaning four rate hikes this year), so the fact the Federal Reserve was not quite this optimistic improved the outlook for the risky commodity correlated currencies.