Weak UK Output Data Weakens Pound Exchange Rates, but Sterling Quickly Recovers ahead of FOMC Minutes

Pound Sterling Exchange Rates Recover after Taking Hit from Weak Sectoral Output Data

Pound Sterling initially weakened yesterday after a bout of poor domestic data, but was able to end the session having made solid gains over the course of the afternoon.

Industrial and manufacturing production, construction output and the National Institute for Economic and Social Research (NIESR) GDP estimate for March all disappointed forecasts. However, the trade balance for February showed a significantly lower-than-expected deficit.

The Bank of England (BoE) will release its Credit Conditions & Bank Liabilities Survey results today.

Weak US Dollar Supports Euro; GBP/EUR Exchange Rate Stuck at Opening Levels

The Euro was largely on solid form yesterday, supported by US Dollar weakness and has markets awaiting today’s important monetary policy meeting minutes release.

This kept the GBP/EUR exchange rate frozen around opening levels, with further support for the Euro coming from the fact that the latest speech from European Central Bank (ECB) President Mario Draghi did not contain any negativity with regards to monetary policy outlook.

It is the ECB’s turn to release monetary policy meeting minutes today, which could boost the Euro if the Governing Council seems to be feeling more confident regarding the policy outlook.

GBP/USD Exchange Rate Climbs despite Strong US Inflation Data as Markets Await FOMC Meeting Minutes

The GBP/USD exchange rate was able to record solid gains during yesterday’s London session, with market appetite for the US Dollar kept muted ahead of the release of Federal Open Market Committee (FOMC) meeting minutes.

Strong inflation data was ignored due to the proximity of the minutes; while prices saw their first monthly drop in 10 months, annual inflation rose at the fastest pace in a year.

In the end the FOMC minutes offered little new information; policymakers are confident about inflation and economic growth, but warned that the former isn’t enough of a justification for accelerating the path of monetary tightening on its own.

If markets have got over the FOMC minutes, US initial and continuing jobless claims figures are set for release this afternoon.

GBP/CAD Holds Opening Levels as USD Weakness Boosts Crude Oil Prices

The Canadian Dollar was able to find some support yesterday from the weaker US Dollar pushing crude oil prices up by around 1%.

However, risk-appetite was in short supply given the potential for the FOMC meeting minutes to significantly change the outlook for both USD and the commodity currencies, limiting Canadian Dollar gains, allowing GBP/CAD to hold opening levels.

The Canadian new housing price index for February is the most influential of the day’s domestic data.

GBP/AUD Gains as Low Risk-Appetite and Poor Data Weighs on Australian Dollar despite Upbeat RBA Governor Lowe Comments

With such a big release from the US just around the corner, it was no surprise that the GBP/AUD exchange rate was able to make some small gains yesterday.

Other data further undermined appetite for the ‘Aussie’, including worse-than-expected Chinese consumer and producer price growth and a softening of Australian consumer confidence.

However, Reserve Bank of Australia (RBA) Governor Philip Lowe was a tad more upbeat than previously in his latest speech. He may have warned that there was no case for a near-term tightening of monetary policy, but also claimed that Australia’s period of low wage growth could be over and that the next move in rates would probably be upwards.

GBP/NZD Exchange Rate Rises as Cold Risk-Appetite Weighs on New Zealand Dollar

Like the other commodity currencies, the New Zealand Dollar was feeling the pressure yesterday as markets focussed on the potential for the FOMC minutes to cause significant volatility. The GBP/NZD exchange rate was therefore able to record minor gains.

The BusinessNZ manufacturing PMI is set for release late tonight.

Laura Parsons

Laura has been working in the financial services sector since 2012 and provides currency news updates for a number of online and print publications. Over the years she has produced exchange rate analysis for publishers like French Property News, The Express, The Telegraph and Forbes.

Contact Laura Parsons