Pound Sterling Exchange Rates Weakened by Spring Budget Statement
Pound Sterling to US Dollar (GBP/USD) and Australian Dollar (GBP/AUD) exchange rates softened yesterday in response to the forecasts unveiled in the recent Spring Budget Statement.
Amongst the think tanks responding to the outlook from the Office for Budget Responsibility (OBR) was the Institute for Fiscal Studies (IFS), which claimed that Chancellor of the Exchequer Philip Hammond will need to scrape together an additional £14 billion from the 2019-20 fiscal year onwards just to avoid a decline in spending as a fraction of national income.
With UK data lacking yet again today, the Pound may struggle to find a rallying point.
Euro (EUR) Exchange Rates Struggle as Industrial Production Falls Short
Euro (EUR) exchange rates were on soft form yesterday as Eurozone industrial production figures for January disappointed by showing a monthly decline of twice the rate forecast.
Year-on-year production slowed from 5.3% to 2.7%, significantly missing expectations of 4.4% growth. Additionally, European Central Bank (ECB) President Mario Draghi gave a speech in which he claimed interest rates in the Eurozone should rise at a measured pace.
Observers were concerned that Draghi might be able to create such strong expectations of a sluggish rate of monetary tightening that even when he steps down in 2019 whoever replaces him will be unable to change the policy outlook for fear of causing market turbulence.
Poor Retail Sales Fail to Dent US Dollar (USD) Exchange Rates
The US Dollar was largely on solid form yesterday, despite a disappointing set of retail sales figures.
US advance retail sales figures for February showed a surprise decline of -0.1% month-on-month, marking the first time since 2012 that retail sales have declined for three months in a row. However, as it is only a week until the anticipated interest rate hike from the Federal Open Market Committee (FOMC) markets were not too perturbed by the data.
US initial and continuing jobless claims figures may create some volatility for the US Dollar today, although markets may find themselves instead looking ahead to next week’s monetary policy decisions.
Drop in Oil Prices Leave Canadian Dollar (CAD) Exchange Rates Weaker
The Canadian Dollar (CAD) spent Wednesday fluctuating against several of the majors.
Although the Canadian Dollar gained on the Pound, the appeal of the ‘Loonie’ was dented by the latest US crude oil inventories figures, which showed that stockpiles increased by over twice the estimate of 2.5 million barrels. This weakened the outlook for demand in the short-term, which pushed oil prices down over half a percent.
Canadian existing home sales figures for February will be published later today.
RBA Comments Bolster Australian Dollar (AUD) Exchange Rates
The Australian Dollar (AUD) gained on Wednesday in response to numerous positive developments. Reserve Bank of Australia (RBA) official Christopher Kent commented that he believed markets may be under-pricing the likelihood of global economic growth accelerating.
He also suggested that stronger global growth could push inflation higher; a hint that he expects Australian interest rates to rise in the medium term. Above-forecast industrial production data for China also helped improve appetite for the Australian Dollar, as it suggests Chinese manufacturers will be demanding more Australian iron ore than previously thought.
New Zealand Dollar (NZD) Exchange Rates React to Growth Data
The New Zealand Dollar was largely on soft form yesterday as markets anticipated New Zealand’s fourth-quarter GDP figures.
Growth came in softer-than-expected on both the quarter and the year. On a quarterly basis growth printed at 0.6% rather than 0.8%, while annual expansion came in at 2.9% rather than the anticipated 3.1%.