Articles from March 2017

Pound hits March high vs. euro

The beginning of Brexit didn’t faze the pound yesterday, with the currency racking up gains all over the place.

The beginning of Brexit didn't faze the pound yesterday, with the currency racking up gains all over the place.

GBP/EUR achieved its best levels of March, surging from a low of $1.1550 to hit $1.1700. While the pound wasn’t able to return to trading above $1.2500 against the US dollar it did gain half a cent despite a sturdy US growth figure.

Sterling stormed higher against the New Zealand dollar, rallying almost 2 cents to achieve a best rate of NZ $1.7890. GBP/AUD gains were slightly less impressive, with the pound failing to hold a high of A$1.6352 and closing the day at AU $1.6267.

What’s been happening?

Although the UK is now facing two years of potentially arduous Brexit negotiations, the pound is currently benefiting from the pretty friendly tone of initial communications between Britain and the EU.

Lloyd’s of London did announce that it would be relocating jobs to Brussels, but markets were cheered by the governmentís plan to implement the ‘Great Repeal Bill’ in May – a move which will turn an epic list of EU laws into British ones.

The pound was also able to advance on the euro due to a disappointing set of inflation figures for Germany. With the nation’s consumer price index decelerating by significantly more than expected, hopes that the European Central Bank (ECB) will tighten stimulus in the near future dimmed, and the euro softened accordingly.

In terms of UK data, the GfK consumer confidence index held at -6 in March rather than sliding to -7 as forecast. The Lloyds business barometer was less reassuring however, dropping from 40 to 35.

What’s coming up?

Already today Nationwide house price figures have fallen short of the mark, with property prices sliding -0.3% on the month (instead of climbing 0.3%) and rising 3.5% on the year (down from price growth of 4.5% in February).

Currency volatility could be on the horizon next week thanks to a number of high-profile data releases. For the UK we’ve got manufacturing, construction and services PMIs, manufacturing/construction output numbers and trade balance figures. If the UK’s PMIs show that growth in the nation’s three key sectors remained robust in March, it would up the odds of more Bank of England (BoE) policymakers voting for higher borrowing costs and give the pound a boost.

The Eurozone will be offering up unemployment and retail sales numbers, along with German factory orders and construction stats. Meanwhile, US dollar fluctuations are most likely to occur in response to the US non-farm payrolls data. Sturdy employment figures would support Fed rate hike expectations (and the US dollar) while any sign of weakness in the labour market could put the plan for two further rate hikes in jeopardy and leave USD exchange rates weaker.

Pound falls before Brexit begins

After riding high at the beginning of the week the pound slid against all the majors on Tuesday.

After riding high at the beginning of the week the pound slid against all the majors on Tuesday.

GBP/EUR dropped from a high of $1.1601 to a low of $1.1453 while GBP/USD tumbled from $1.2591 to $1.2383. The poundís performance against the commodity currencies was equally poor, with GBP/AUD sliding from a two-month high and the GBP/NZD exchange rate plummeting from its best levels since last December.

The pound’s impressive start to the week proved short lived and the currency racked up a number of sizable losses on Tuesday. The GBP slide was largely attributed to profit-taking, although comments from the Bank of England’s (BoE) Ian McCafferty didn’t help the situation.

The BoE policymaker indicated that the UK economy is likely to experience a gradual slowdown in the months ahead. He added that he was uncertain about when he would feel confident enough to vote to increase interest rates.

According to McCafferty, the BoE ‘will be raising interest rates and eventually reversing QE (bond purchases) as soon as the economy looks strong enough to bear it. I think the economy is strengthening slightly over the course of last year and into the early part of this year. Whether it stays as strong is still very much an open question, because we are seeing inflation starting to pick up.’

The GBP/USD exchange rate also fell as the US dollar was supported by an impressive US consumer confidence score while GBP/CAD declined in the face of surging oil prices.

What’s coming up?

Today it’s all about Brexit, and the official start of the UK’s two year negotiations with the EU. Prime Minister Theresa May is set to activate Article 50 of the Lisbon Treaty at lunchtime today.

According to Lloyds Bank; ‘The Article 50 letter, signed by PM May, will be hand delivered by Sir Tim Barrow, the UK’s permanent representative in Brussels, to EU Council President Donald Tusk. – The contents of the letter will be examined for any differences with Mrs Mayís Lancaster House speech in January which detailed the government’s negotiating objectives, including the future trading relationship with the EU.’

While the pound could extend yesterday’s losses once Article 50 is activated, some economists believe the event has been so long anticipated that GBP exchange rates could actually climb on the news.

Sterling’s long-term outlook is a little less certain however. The tone of the initial Brexit negotiations will be crucial. If it appears that the EU is unlikely to make many concessions (or if it looks as though PM May will be pursuing a so-called ‘hard Brexit’) we may see the pound give up the advances itís made over the past few months.

Trump worries send GBP higher, Scottish vote ahead

The pound enjoyed a day of pretty solid gains at the start of the week.

The pound enjoyed a day of pretty solid gains at the start of the week.

With the currency rising to an almost two month high against the US dollar while recording its best level against the Canadian dollar since December. GBP/AUD also marched to its highest rate since February, although the poundís gains against the euro were more muted.

GBP/EUR spent the day fluctuating between ‘1.1467 and ‘1.1615, GBP/USD advanced from a low of $1.2365 to a high of $1.2612 and GBP/CAD stormed to a high of C$1.6872.

Whatís been happening?

Yesterday the pound managed to romp higher against most of its currency rivals despite a lack of juicy UK data. The currencyís gains were largely in reaction to developments in the US, with a lack of confidence in President Trumpís abilities to push through economic policies triggering heavy US dollar losses.

Comments from Fed policymaker Charles Evans also kept the US dollar under pressure. Although the Federal Reserve Bank of Chicago President indicated that he still envisages three rate hikes taking place this year, he added that two may be appropriate if the current inflation uncertainty persists.

Meanwhile, upbeat German IFO surveys limited the poundís gains against the euro, with German business morale hitting its best level for almost six years.

What’s coming up?

Today the Scottish government is expected to vote in favour of making a request to Westminster for a second independence referendum. Yesterday Prime Minister Theresa May visited Scotland in order to urge Scottish voters to keep Britain unified, asserting that (with Brexit negotiations about to kick off) now is not the time for more discord.

If the Scottish government does vote in favour of pushing forward with referendum plans, the pound could register modest losses later today.

GBP exchange rates may also start giving up their recent gains ahead of tomorrow and the much-anticipated activation of Article 50.

There’s no UK data on the calendar today, but there are US trade balance and consumer confidence figures to look out for. Speeches from various Fed officials (including Chairwoman Janet Yellen) will also be drawing focus, with any interest rate-related remarks having the potential to either send the US dollar lower still or help it recover ground.

Additionally, the GBP/CAD exchange rate could move away from its recent highs if Bank of Canada Governor Stephen Poloz adopts an optimistic tone in todayís speech.

Pound recovering losses before Article 50 activation

Although the pound dipped from its highs before the weekend, Sterling still ended Friday up on the week’s opening levels against most of its currency counterparts.

Although the pound dipped from its highs before the weekend, Sterling still ended Friday up on the weekís opening levels against most of its currency counterparts.

GBP/EUR fell from its best rate of ‘1.1615 to trade at ‘1.1569, GBP/USD closed the week at $1.2471 (up from lows of $1.2344) and GBP/AUD managed to hold AU$1.6358 after starting Monday at AU$1.5966.

What’s been happening?

Hints from the Bank of England (BoE) that rising inflation may not prompt higher interest rates were the main cause of the poundís losses on Friday.

Central bank official Gertjan Vlieghe left GBP exchange rates weaker when he commented that the recent spike in domestic consumer price pressures may not have an impact on monetary policy.

He stated; ‘It is not at all obvious what the impact for monetary policy would be and it might not have one. If [the pound’s post-referendum decline] is the reason why inflation is higher than expected, it does not necessarily have an impact unless it also feeds into inflation expectations.’

Over in the Eurozone, the euro was bolstered by an impressive composite PMI print. The six-year high in private sector growth contributed to the GBP/EUR slide before the weekend.

However, the GBP/USD exchange rate was able to recover Friday’s losses as President Donald Trump’s ability to implement planned tax reforms and stimulus measures was called into question.

What’s coming up?

Although there isn’t any UK data on the calendar to look out for today, the pound has so far managed to start the week quite strongly. GBP/EUR has returned to trading above ‘1.1550 while the GBP/USD and GBP/AUD exchange rates have both advanced by over 0.7%. GBP/NZD is up 0.5%.

The first UK reports arenít due out until Wednesday, but with the activation of Article 50 also taking place that day the consumer credit and mortgage approvals numbers might not have much impact.

Of the week’s domestic releases, the most influential are likely to be Thursday’s GfK Consumer Confidence Survey and Fridayís final 4Q GDP figure. An improvement in sentiment would be pound supportive, as would confirmation that the UK economy expanded by 0.7% in the final quarter of 2016 (as previously forecast).

Pound steady as Article 50 trigger date approaches

Although we’re now only six days away from the long-awaited activation of Article 50, the pound is proving resilient and its best levels of the week could be yet to come.

Although we’re now only six days away from the long-awaited activation of Article 50, the pound is proving resilient and its best levels of the week could be yet to come.

Sterling edged slightly lower yesterday as excitement over the inflation surge eased. However, GBP largely returned to opening levels before the close of the European session despite the UK being shaken by a terror attack in London.

GBP/EUR was holding ‘1.1546, GBP/USD remained close to $1.2500 and GBP/AUD held firm above AU$1.6250.

What’s been happening?

After the flurry of activity inspired by the UK’s inflation report earlier in the week, trading was a little flat on Wednesday.

A lack of high-profile data prevented the pound advancing further as the eyes of the world turned to the shocking events that took place outside the Parliamentary building in London.

Meanwhile, the decline in bets that the Federal Reserve will increase interest rates more than three times in 2017 weakened demand for the US dollar and the euro failed to display much response to a 15-month low Eurozone current account surplus.

Down in the South Pacific, the Reserve Bank of New Zealand (RBNZ) left interest rates on hold as expected. The central bankís policy statement was little changed from February, although it did seem slightly less concerned about the relative strength of the New Zealand dollar. The upshot of the announcement was that the GBP/NZD exchange rate got to hold its previous 2 cent gain.

What’s coming up?

Aside from the UK retail sales numbers, we have a speech from Fed Chairwoman Janet Yellen and Eurozone consumer confidence data on the calendar for today.

The pound could hit its highest levels of the week so far if the UK sales report shows the forecast uptick in consumer spending, but the recent terror incident may limit demand for the British currency. The pound is also liable to start feeling the pressure ahead of the weekend with the activation of Article 50 in sight.

Looking ahead to Friday weíve got a number of reports for the Eurozone to focus on.

Sturdy PMIs for the currency bloc and its major economies would be euro supportive. The only UK news will be the BBA loans for house purchase stat, which is expected to detail an increase in property lending.

As we’ve also got Canadian inflation data and US durable goods orders due for publication, USD and CAD exchange rates could be in for some movement.

Pound holding losses vs. euro and US dollar

The pound took a pretty big tumble as the weekend approached and the currency is still close to multi-week lows.

The pound took a pretty big tumble as the weekend approached and the currency is still close to multi-week lows.
What movement have we seen in the currency market?

Concerns that Scotland could be on the verge of calling another independence referendum pressured the pound lower at the beginning of last week, and it was largely downhill from there.

As we headed into the weekend the pound euro exchange rate was trading at 1.15, 2 cents lower than the weekís opening levels. The pound also shed 2 cents against the US dollar. It wasnít all bad news for Sterling however as the currency stabilised against the Australian dollar and managed to end the week higher against the New Zealand dollar.

Why did the pound slide?

The biggest pound losses followed the release of the UK’s latest services PMI, which fell from 54.5 to 53.3. As the service sector accounts for over 70% of total GDP, the surprisingly strong slowdown increased speculation that the Bank of England (BoE) could cut interest rates further despite the recent spike in inflation.

Concerns that the resilience demonstrated by the UK economy in the second half of 2016 could be at an end ensured that the pound consolidated its declines before the weekend.

What should you be looking out for?

While UK data is in pretty short supply until the tail end of the week, speeches from two BoE officials could inspire pound movement in the hours ahead.

Both Andy Haldane (the central bankís chief economist) and Deputy Governor Charlotte Hogg are set to speak and the tone of their comments could either help the pound recoup losses or see its downtrend continue. As Hogg only recently joined the BoE, her remarks will be of particular interest.

If she follows up her previous statement (‘the Monetary Policy Committee’s current forecast assumes steadily slowing growth in consumption, facilitated by a continued fall in the savings rate’) with similar commentary, the pound may not have the best start to the week.

In other currency news, the US dollar is likely to react to the day’s US durable goods orders and factory orders reports. Positive data would support bets of a March rate hike from the Federal Reserve ñ strengthening USD and weakening higher risk currencies like the Australian dollar and New Zealand dollar.

Strong UK retail sales pushes pound even higher

Strong retail data saw the pound jump higher against its major peers on Thursday.

Strong retail data saw the pound jump higher against its major peers on Thursday.

GBP/EUR hit a three week high of ‘1.1614 thanks to 0.5% gains, while GBP/USD rose to $1.2521; its best level in almost four weeks.

Weakness in the Australian dollar allowed GBP/AUD exchange rates to charge 0.7% higher to A$1.6411 – the highest since the start of February – while GBP/NZD rose to a new 2017 best of N$1.7785 and GBP/CAD to a 15-week high of 1.6688.
Whatís been happening?

February’s UK retail sales figures managed to exceed the already strong expectations yesterday. Annualised sales leapt from 1% growth in January to 3.7% instead of to the anticipated 2.6%.

The pound was helped higher against the euro thanks to the latest Economic Bulletin from the European Central Bank (ECB). While the ECB noted that the economic recovery in the Eurozone was picking up speed, it continued to offer a weak outlook on inflation.

Meanwhile, investors interested in the US dollar were disappointed that a speech from Federal Reserve Chair Janet Yellen did not contain any reference to the interest rate outlook.

GBP/NZD rose even further after the latest trade figures from New Zealand; the trade balance remained in deficit, shrinking from -N$257 million to only -N$18 million instead of clocking in an N$180 million surplus.

What’s coming up?

Only loans for house purchase data covering February is set for release from the UK today, while the Eurozone offers a slew of influential business surveys, Canada will publish inflation data and the latest durable goods orders figures will be released by the US.

The Pound could receive a leg-up from todayís reports: the Eurozone surveys are largely expected to soften, while the dayís Canadian inflation data and US durable goods orders figures are believed to have slowed on the month

So, while the pound may not be in charge of exchange rate movement much today, it could find itself pushed higher as the other major currencies weaken in response to the dayís reports.

Pound hits best levels after UK inflation data

With the UK’s latest inflation figures exceeding forecasts on Tuesday, the pound skipped higher against all its major currency rivals.

With the UKís latest inflation figures exceeding forecasts on Tuesday, the pound skipped higher against all its major currency rivals.

As well as hitting a ten day high against the euro (of ‘1.1560) the pound achieved a three-week high of $1.2498 against the US dollar and struck C$1.6703 against the Canadian dollar – its best level of 2017 so far.

The GBP/AUD exchange rate also moved from a low of AU$1.6055 to a high of AU$1.6298 while GBP/NZD surged from NZ$1.7577 to NZ1.7766.

What’s been happening?

With last week’s Bank of England (BoE) policy meeting indicating that rising consumer price pressures could prompt the central bank to increase borrowing costs sooner, the UK’s inflation data for February was yesterday’s big news.

The year-on-year CPI result of 2.3% exceeded forecasts of 2.1%.

Although BoE Governor Mark Carney later urged people not to overreact, the data still gave BoE rate hike expectations (and demand for the pound) a shot in the arm.

However, the poundís gains against the euro were a little limited following the first televised debate in the French election. Emmanuel Macron was dubbed the winner of the clash of candidates and the reduced odds of far-right Marine Le Pen dominating the first round of proceedings helped boost demand for the euro.

What’s coming up?

There isnít any influential UK news to look out for today, so the pound may be able to hold yesterday’s gains as long as no fresh information about the upcoming activation of Article 50 comes to light.

Today’s Eurozone current account figures may have a modest impact on the euro, and the US dollar’s housing data could push GBP/USD away from its recent three-week high if it impresses. GBP/NZD is more likely to experience volatility today however with the Reserve Bank of New Zealand (RBNZ) set to deliver its interest rate decision.

While no change to borrowing costs is expected, if policymakers fixate on the recent slowing in domestic GDP and maintain a cautious interest rate outlook, the pound could extend gains against the New Zealand dollar.

Article 50 activation date sends pound lower

Although the pound began the week on a bit of a high, the currency experienced a prompt reversal of fortunes as the official date for the activation of Article 50 was announced.

Although the pound began the week on a bit of a high, the currency experienced a prompt reversal of fortunes as the official date for the activation of Article 50 was announced.

The news that Article 50 would be triggered on March 29th saw the GBP/EUR exchange rate fall from a high of  ‘1.1548 to a low of  ‘1.1476. GBP/USD also lost more than 0.3% to slide to 1.2333 while both the GBP/AUD and GBP/NZD exchange rates slumped by over 0.7%.

Wise Money Markets Roundup

Prime Minister Theresa May’s plans to activate Article 50 before the end of March have been hitting headlines for quite some time. As itís been on the horizon for a while, some industry experts had predicted that the impact of the event on the pound would be minimal. While that didn’t stop Sterling falling when the date was confirmed on Monday, the currency could recover its knee-jerk losses over the rest of the week.

Economic data was in pretty short supply on Monday, with the UK Rightmove House Price index coming in at 1.3% month-on-month and 2.3% year-on-year. German producer price data fell short of forecasts, but the report had little impact on the euro as investors instead focused on the results of the latest polls for the French election. Current forecasts put the odds of right-wing candidate Marine Le Pen winning the first round of the process at 26% (neck-and-neck with closest rival Emmanuel Macron).

Currency Forecast

Although Article 50 is likely to remain in the spotlight over the week ahead, this weekís UK inflation data and retail sales figures could help the pound return to its recent highs against peers like the euro, US dollar, Australian dollar and New Zealand dollar.

If today’s inflation data confirms that the annual Consumer Price Index pushed above the Bank of Englandís (BoE) 2% target in February, it would increase the pressure on the central bank to raise interest rates – potentially boosting the pound in the process.

Similarly, this week’s domestic retail sales numbers are expected to show a rise in year-on-year consumer spending and could lend the pound further support if the estimates prove accurate.

However, if either of these reports miss the mark, we may see the poundís decline continue in the build up to March 29th.

Other economic reports to focus on today include Canadaís retail sales data and Australiaís leading index.

Pound still riding high after BoE decision

Last week’s Bank of England (BoE) interest rate decision saw the pound end the week higher against the euro and US dollar.

Last week’s Bank of England (BoE) interest rate decision saw the pound end the week higher against the euro and US dollar.

With UK inflation figures due out tomorrow, GBP could have further to climb.

As markets opened on Monday the GBP/EUR exchange rate was holding above Ä1.15 while GBP/USD stormed to high of $1.2436.

Wise Money markets Roundup

Last week was rammed with influential news, with the Dutch election, US interest rate decision and Bank of England (BoE) policy meeting all inspiring significant currency movement. While victory for Prime Minister Mark Rutte in the Netherlands lent the euro support, the US dollar weakened after a less-than-exciting policy statement from the Fed. The pound, meanwhile, was the weekís big winner thanks to an unexpected vote for an immediate rate hike in the BoE policy meeting.

Both the Australian dollar and New Zealand dollar benefited from the Fedís unchanged outlook towards future rate adjustments, but concerning growth figures from New Zealand limited NZD gains.

Currency Forecast

We could be on course for another interesting week in the currency market. Although there arenít any major news items on the calendar for today, tomorrowís UK inflation report has the potential to continue the poundís recent rally.

As some members of the BoE Monetary Policy Committee (MPC) have hinted that consumer price pressures could encourage them to vote for higher borrowing costs in the near future, another spike in inflation would be pound-supportive. Currently analysts expect a 0.5% increase in the Consumer Price Index in February, month-on-month, with an annual figure of 2.1%. This would take year-on-year inflation above the BoEís 2% target and would increase concerns that consumer spending will be restrained in the months ahead.