Lack of UK Data Leaves Pound Sterling Exchange Rates without Momentum
The Pound was on mixed form on Friday, responding to the strengths or weaknesses in its major peers.
There was no fresh UK data to change the near-term outlook for Sterling, and GBP was largely immune to a warning from the Bank of England (BoE) regarding a rise in risky lending.
According to Threadneedle Street, around a fifth of all new mortgage lending comes very close to the 4.5 times income limit imposed to prevent households from overstretching themselves with credit.
The Pound could weaken today as markets focus on the approach of tomorrow’s February UK consumer price index figures, which are expected to show the pace of inflation has slowed.
Disappointing Eurozone Inflation Data Enables Minor GBP/EUR Exchange Rate Gains
The GBP/EUR exchange rate was able to edge higher on Friday after a surprise downwards revision to early estimates for Eurozone consumer price growth during February.
While the finalised core inflation rate reading held steady at 1% as expected, the overall inflation rate was cut from 1.3% to 1.1%.
Meanwhile wage growth for the fourth quarter of 2017 slightly undershot forecasts, rising from 1.6% to 1.7% instead of meeting the consensus expectations of 1.8%.
Altogether the day’s data did nothing to improve the inflation outlook.
Eurozone trade balance and construction output figures for January are set for release today.
Strong Rise in US Sentiment Keeps GBP/USD Exchange Rate below Opening Levels
The Pound Sterling to US Dollar exchange rate was kept just below opening levels on Friday, after the latest University of Michigan sentiment index showed a strong and unexpected uptick in household confidence.
The preliminary index for March was expected to weaken from February’s reading of 99.7 to 99.3, but instead climbed to 102. The current conditions sub-index climbed from 114.9 to 122.8.
Industrial and manufacturing production for February were also positive compared to expectations, expanding 1.1% instead of 0.3% and 1.2% instead of 0.4% respectively.
In another positive sign capacity utilisation rose further than expected to 78.1%, pointing to tightness in the labour market; a sign of strength the Federal Reserve will certainly appreciate.
GBP/CAD Exchange Rate Climbs as Markets Focus on Gloomy Canadian Monetary Policy Outlook
Focus on the gloomy outlook for Canadian interest rates was weighing on the Canadian Dollar on Friday, allowing the GBP/CAD exchange rate to make solid gains.
Comments from Bank of Canada (BOC) Governor Stephen Poloz earlier in the week about the potential for the Canadian economy to generate growth without further inflation was still haunting the ‘Loonie’, with markets also fearing that policymakers would wait until there was greater clarity regarding the Canada-US trade relationship before proceeding with monetary policy adjustments.
The marginally worse-than-expected -1% decline in January’s manufacturing sales on the month further added to the gloom surrounding the Canadian Dollar.
Threat of US Trade Tariffs against China Boosts GBP/AUD Exchange Rate
The GBP/AUD exchange rate gained over half a percent on Friday, with the Australian Dollar slumping across the board thanks to the latest strong US data and fears that President Donald Trump’s administration was about to levy new trade tariffs upon China.
The impact of this could be felt throughout the Asian economies, weakening trade for Australia with its major partners in the region.
The ANZ Roy Morgan weekly consumer confidence index for the week ending 18th March is set for release later tonight.
GBP/NZD Exchange Rate Climbs as New Zealand Dollar Weakens on Risk Appetite Decline
Like the Australian Dollar, the New Zealand Dollar was weakened on Friday by a solid and unexpected rise in US consumer sentiment and fears that Donald Trump may be about to slap more tariffs upon Chinese imports.
Trump’s US trade ambassador earlier in the week gave him a plan to tax US$30 billion worth of Chinese imports per year, so markets are now holding their breath as they wait to see whether Trump will follow through and implement the recommendations.