GBP/EUR nears €1.18 before wage data

Although the pound didn’t have much of an initial reaction to the UK’s latest inflation data, GBP later surged against is rivals as geopolitical developments left investors wary of higher-risk currencies.

Although the pound didn’t have much of an initial reaction to the UK’s latest inflation data, GBP later surged against is rivals as geopolitical developments left investors wary of higher-risk currencies.

The pound was able to approach the €1.18 level against the euro, hitting a high of €1.1780, while GBP/USD advanced by over half a cent to strike $1.2494.
Sterling’s performance against the Australian and New Zealand dollars was even more impressive, with GBP/AUD jumping to a two-month high of AU$1.6682 and GBP/NZD climbing to its best levels since December 2016 (NZ$1.8008)
If average earnings increase Sterling could extend yesterday’s gains and potentially hit new multi-week and multi-month highs.
The UK’s inflation data (billed to be yesterday’s big news item) turned out to be a bit of a non-event in terms of inspiring pound movement.
Inflation was shown to have remained at a three-year high of 2.3% in March thanks to rising tobacco, food, alcohol, and clothing prices.
However, as the result wasn’t viewed as having much influence on Bank of England (BoE) interest rate hike expectations (it would take a substantial uptick in consumer price pressures to push the central bank into adjusting policy) its impact on the pound was minimal.

But later in the day the pound came into its own amid reports that American officials had made public warnings to Russia, China and North Korea. With North Korea insinuating that it has nuclear weapons aimed at US army bases, fears that geopolitical tensions could rapidly escalate saw higher-risk currencies drop and the pound climb.

 

Wise Money markets data coming up

Today the UK is set to publish its latest batch of employment figures. The unemployment rate is expected to remain at 4.7%, with the UK having added 68k positions.
While the pound could enjoy a little boost if it turns out that the UK added more jobs than expected, the wage numbers are likely to have more influence on how GBP performs today.
If average earnings increase (despite being forecast to remain unchanged at 2.2%) Sterling could extend yesterday’s gains and potentially hit new multi-week and multi-month highs.
However, any slowing in average earnings would relieve the pressure on the BoE to make adjustments to interest rates and could send the pound tumbling in the hours ahead.
Other news to watch out for today includes a speech from BoE Governor Mark Carney and the Bank of Canada (BoC) interest rate decision.
The BoC isn’t expected to make any adjustments to monetary policy but if it issues cautious commentary about the risks facing the domestic economy, the GBP/CAD exchange rate could climb.

French election fears leave euro weaker, UK inflation ahead

After dipping at the tail end of last week, the pound spent Monday recovering losses.

After dipping at the tail end of last week, the pound spent Monday recovering losses.

The GBP/EUR exchange rate firmed from €1.1705 to €1.1738, GBP/USD climbed from $1.2388 to $1.2429 and GBP/NZD bounced back from NZ$1.7825 to NZ$1.7886.
GBP/AUD spent the day fluctuating between AU$1.6539 and AU$1.6583, but GBP/CAD closed Monday slightly lower as oil prices spiked.
The pound was able to start the week fairly strongly, recouping recent losses despite a report revealing a sharp decline in credit card spending. The data, which was published by Visa, showed that monthly spending patterns dipped in March.
However, while the report hinted at a slowdown in consumer activity, expectations that today’s UK Consumer Price Index will show that inflation remained above the Bank of England’s 2% target in March helped the pound advance. While growing price pressures and stagnant wage growth could restrain consumer spending, higher inflation might encourage the BoE to hike interest rates sooner than forecast, so a strong inflation result today could see the pound extend yesterday’s gains.

The rise in GBP/EUR was also the result of mounting fears about the French election. With two of the top three candidates having an anti-EU stance (far-left candidate Jean-Luc Melenchon has now taken third place), the euro is likely to remain under pressure as the first round of voting approaches.

Wise Money markets data coming up

While today’s UK inflation data is liable to be the main mover of pound exchange rates, news from the Eurozone could also have an impact on GBP/EUR.
ZEW research centre is set to publish its Economic Sentiment surveys for Germany and the Eurozone.
The German index is believed to have jumped from 12.8 to 14.8 in April, a result which could give the euro a boost.
If the Eurozone measure also shows an increase in confidence, and the German gauge of the current situation improves as anticipated, the euro may be able to limit the pound’s gains in the event of a stronger-than-anticipated UK CPI reading.
As it stands, UK inflation is expected to come in at 0.3% on the month (down from 0.7% MoM in February) and 2.3% on the year.
Core inflation is believed to have eased from 2.0% to 1.9%.
It would take an above-forecast result to really bolster BoE interest rate hike expectations, so the pound could spend the day drifting lower if inflation falls short.

Poor UK data leaves pound weaker

After a mixed day of trading the GBP/EUR exchange rate managed to just about hold €1.17.

After a mixed day of trading the GBP/EUR exchange rate managed to just about hold €1.17.

Less than impressive UK data left the pound weaker against the US dollar on Friday, and a general risk-off mood failed to limit Sterling’s losses against the Australian, New Zealand and Canadian dollars. The pound did hold firm against the euro however, with GBP/EUR managing to hold above the €1.1700 level.
GBP/USD dropped from $1.2473 to $1.2369 while GBP/NZD dipped from NZ$1.7908 to NZ$1.7795 and GBP/CAD slumped from C$1.6715 to C$1.6557.
GBP/AUD closed the week at AU$1.6500 but jumped by 0.5% on Monday as investors responded to the latest Australian housing data.
Accelerating consumer price pressures might force the BoE to reconsider its current wait-and-see stance on interest rates, so a stronger rate of inflation could send the pound higher.
There were a number of UK reports on the data calendar on Friday, but unfortunately for the pound none of them offered much cause for cheer.
Both industrial and manufacturing production unexpectedly declined in February (by -0.7% and -0.1% respectively) while construction output dropped -1.7% on the month and slowed to 0.5% on the year.
The UK’s trade deficit also widened and the NIESR GDP estimate for March signalled a slowing in growth in the first quarter.
Demand for the pound also eased as Bank of England (BoE) Governor Mark Carney gave no indication that UK interest rates would be increased in the near future.
Meanwhile, the US airstrike on a Syrian military base limited demand for higher-risk currencies but sent oil prices to a new one-month high (boosting the Canadian dollar in the process).

The US dollar closed out the week in a broadly stronger position as the US unemployment rate fell to its lowest level since 2007.

Wise Money markets data coming up

Today we’ve got news from the Eurozone, in the form of the Sentix investor confidence gauge, and a speech from Federal Reserve chairwoman Janet Yellen.
If the Eurozone’s confidence index shows the improvement in sentiment forecast by economists the GBP/EUR exchange rate could be pressured slightly lower.
Similarly, any hints from Yellen that the Fed could increase the number of planned interest rate hikes in 2017 would put pressure on GBP/USD.
The first bit of exciting UK news, the nation’s inflation report for March, is due out tomorrow.
At the moment the consumer price index is expected to come in at 0.3% on the month and 2.3% on the year. Accelerating consumer price pressures might force the Bank of England (BoE) to reconsider its current wait-and-see stance on interest rates, so a stronger rate of inflation could send the pound higher.

Euro runs into trouble as ECB dismisses idea of policy change

After a mixed day of trading the GBP/EUR exchange rate managed to just about hold €1.17 (although this was largely due to euro weakness).

After a mixed day of trading the GBP/EUR exchange rate managed to just about hold €1.17 (although this was largely due to euro weakness).

GBP/USD failed to climb back above the $1.25 level and GBP/NZD slid from its 2017 high, but GBP/AUD did push from AU$1.6471 to AU$1.6559.
Meanwhile, a one-month high for oil prices drove GBP/CAD from C$1.6793 to a low of C$1.6682.
A widening deficit or a slower pace of domestic growth may counter any positive impact from the production numbers.
The UK’s economic calendar was empty yesterday, leaving the pound to move at the mercy of external events.
GBP sentiment was solid mid-week thanks to the UK’s impressive service sector report, but concerns about overall growth slowing in the first quarter of 2017 left the pound fluctuating as the weekend approached.
Sterling was eventually able to march higher against the euro however as officials from the European Central Bank (ECB) indicated that the institution is happy with current monetary policy and has no plans to either taper quantitative easing or increase interest rates in the near future.
Draghi left the euro struggling when he stated; ‘We are confident that our policy is working and that the outlook for the economy is gradually improving. But even so, we have not yet seen sufficient evidence to materially alter our assessment of the inflation outlook – which remains conditional on a very substantial degree of monetary accommodation. Hence a reassessment of the current monetary policy stance is not warranted at this stage.’

ECB Vice President Vítor Constâncio and Executive Board Member Peter Praet supported the view that borrowing costs aren’t likely to be altered any time soon. As well as dipping against the pound, the euro fell to a low of 1.0627 against the US dollar.

Wise Money markets data coming up

Before we kick back for the weekend we could see a final flurry of pound movement thanks to the UK’s industrial and manufacturing production numbers. Both measures have been forecast to show growth in February – a result that could be pound positive.
However, the day’s UK trade data and NIESR GDP estimate for March may limit pound gains if they show a widening deficit or a slower pace of domestic growth.
A speech from Bank of England (BoE) Governor Mark Carney is also on the horizon and his tone on the subject of interest rates could be key to how the pound closes out the week. Hints of a rate hike could send the pound soaring, but indications that rates are going to remain on hold for the foreseeable future would be negative for GBP.
There’s also some high-profile US news to focus on, in the form of the nation’s non-farm payrolls report. As solid growth in the labour market might convince the Federal Reserve that more than three rate hikes will be necessary in 2017, the US dollar could stop the pound breaching $1.25 if the NFP report exceeds expectations.
Finally, GBP/CAD volatility may follow the publication of Canada’s own jobs data. The unemployment rate is believed to have increased in March and (if that proves to be the case) the pound could close out the week trading higher against the Canadian dollar.

Sterling bounces back on service sector strength

Wednesday turned out to be pretty positive for the pound thanks to an unexpectedly upbeat UK services report.

Wednesday turned out to be pretty positive for the pound thanks to an unexpectedly upbeat UK services report.

GBP/EUR surged from €1.1645 to €1.1717, GBP/USD rebounded from $1.2439 to $1.2499 and GBP/AUD jumped from AU$1.6403 to AU$1.6539. GBP/NZD, meanwhile, struck its best levels of 2017 by advancing from NZ$1.7821 to NZ$1.7952.
Whether or not the GBP/EUR exchange rate is able to push comfortably above €1.17 largely depends on a run of speeches from ECB officials.
Yesterday’s pound gains were almost entirely driven by the UK’s services PMI from Markit.
As the services sector accounts for over 70% of total economic growth, the news that the index edged up from 53.3 to 55.0 in March was enough to send GBP exchange rates higher.
This was the strongest rise in service sector activity of the year so far, prompting this response from Duncan Brock of the Chartered Institute of Procurement & Supply; ‘Taking March in isolation, the service sector defied the slowdown experienced by construction and manufacturing firms. A stronger end to the first quarter from the biggest contributor to UK GDP will provide some relief to the UK economy as a whole, shaken and stirred by continuing highs and lows since the Brexit vote.’
The report was good enough to counteract the impact of Bank of England policymaker Gertjan Vlieghe asserting that there’s no need for UK interest rates to be increased anytime soon and the pound managed to hold gains overnight.

Wise Money market data coming up

There isn’t much happening in the UK today, so the currency market is more likely to be moved by developments in the Eurozone and US.
Whether or not the GBP/EUR exchange rate is able to push comfortably above €1.17 largely depends on a run of speeches from ECB officials.
Any references to the future path of monetary policy from ECB President Mario Draghi, Vice President Vítor Constâncio or Executive Board Member Peter Praet could inspire notable euro movement.
If the officials indicate that policy is unlikely to be adjusted for the foreseeable future, GBP/EUR could potentially advance to its best levels of the week so far.
However, any hints that either the central bank’s quantitative easing scheme could be tapered or that interest rates could rise sooner than expected would help EUR exchange rates climb before the weekend.
Over in the US we’ve got initial jobless claims and continuing claims numbers. Yesterday’s US employment report smashed forecasts and more positive jobs figures would lend the US dollar support ahead of tomorrow’s influential non-farm payrolls data.

Services PMI, Trump and French elections in focus, will GBP keep sliding?

The pound held losses against the euro and US dollar on Tuesday, with GBP/EUR fluctuating between €1.1700 and €1.1643 and GBP/USD ending the day at $1.2425.

The pound held losses against the euro and US dollar on Tuesday, with GBP/EUR fluctuating between €1.1700 and €1.1643 and GBP/USD ending the day at $1.2425.

Although demand for higher-risk currencies faltered, the pound also dipped to a low of AU$1.6402 against the Australian dollar. Sterling did manage to hold its own against the New Zealand dollar however (despite an increase in dairy prices) with GBP/NZD reaching a high of NZ$1.7862.
The UK’s services PMI is likely to be the main cause of pound movement, with a positive result having the potential to send Sterling back to its weekly highs.
Although yesterday’s UK construction PMI showed an unexpected dip in output in March, the report had little real impact on the pound.
As Monday’s manufacturing measure also fell short, the release increased concerns that today’s much more influential services PMI will complete a hat trick of less-than-impressive stats and indicate that the UK economy faltered at the end of the first quarter. However, general anxieties about the global economic outlook were the main cause of weakness in GBP exchange rates.
There are a number of factors reducing risk appetite at the moment, including the French election, the suspected terrorist attack in St Petersburg and concerns about the direction this week’s meeting between US President Donald Trump and Chinese President Xi Jinping could take. These anxieties served to boost the safe-haven US dollar but limit demand for the pound.

GBP/EUR losses were also the result of the Eurozone publishing more upbeat data, with the region’s latest retail sales report showing a stronger-than-expected increase in consumer spending.

Wise Money market data coming up

The UK’s services PMI is likely to be the main cause of pound movement in the hours ahead, with a positive result having the potential to send Sterling back to its weekly highs.
As it stands, economists have forecast a modest acceleration in growth from 53.3 to 53.5.
However, if the services measure falls (like its manufacturing and construction equivalents) the pound could keep sliding.
US data may also inspire GBP/USD movement today, with the nation set to publish the ADP employment change number and services PMI.
The labour data is forecast to show a deceleration in the number of positions added in March. As any softening in employment is likely to prevent the Federal Reserve from revising its current plans to increase interest rates just twice more in 2017, the US dollar could fall if the report meets expectations.

Pound dips on UK manufacturing slump

After starting the week strongly, the pound spent Monday sliding against currencies like the US dollar and euro.

After starting the week strongly, the pound spent Monday sliding against currencies like the US dollar and euro.

The GBP/EUR currency pair fell from a high of €1.1741 to a low of €1.1636, while GBP/USD snuck back below the key $1.25 level to trade in the region of $1.2442.

The pound’s losses against the commodity currencies were less significant, with GBP/AUD managing to return to trading at AU$1.6438 following the Reserve Bank of Australia’s (RBA) interest rate decision. GBP/CAD also held pretty steady as the resumption of oil production in Libya saw the price of Canada’s core commodity dip.

A construction PMI reading of less than 52.5 could see the pound extend its recent losses against the euro and US dollar.

The main cause of the pound’s Monday downtrend was the UK manufacturing PMI from Markit.
The gauge had been forecast to come in at 55, but it actually fell to 54.2 in March. February’s figure was also negatively revised to 54.5.
Although the report contained a fair few positives, it also indicated that growth in the sector is expected to keep easing.
Markit Senior Economist Rob Dobson noted; ‘With growth losing further momentum in March, that weaker trend is likely to continue into the second quarter. The latest survey also clearly shows that high costs and weak wage growth are sapping the strength of consumers, with rates of expansion in output and new orders for these products slowing further.’
Meanwhile, the euro was supported by a decline in the Eurozone’s unemployment rate from 9.6% to 9.5%. The currency bloc’s manufacturing PMI also came in at its best level in six years.

Over in Australia, a disappointing Australian retail sales report was swiftly followed by the Reserve Bank of Australia’s (RBA) latest interest rate decision. While the central bank left interest rates on hold, the concerns it expressed about Australia’s housing market kept the ‘Aussie’ under pressure.

Wise Money market data coming up

Today’s main UK news is the nation’s construction PMI for March. The index is expected to come in at 52.5, unchanged from February.
While the UK construction sector only accounts for around 6% of total economic growth, a below-forecast reading would increase concerns that tomorrow’s much more influential services PMI will also show a slide in output.
Subsequently, a reading of less than 52.5 could see the pound extend its recent losses against the euro and US dollar.
However, the GBP/EUR pairing could fight back in the afternoon if the Eurozone’s retail sales stats disappoint or if European Central Bank (ECB) President Mario Draghi indicates that monetary policy is unlikely to be adjusted for the foreseeable future.
The GBP/USD exchange rate could also experience further movement before the end of the day as the US publishes its factory orders and durable goods orders numbers for February.

Is the pound headed for new highs this week?

A Sterling surge before the weekend helped the pound close out the week in a stronger position against the euro and recover earlier losses against both the US and Australian dollars.

A Sterling surge before the weekend helped the pound close out the week in a stronger position against the euro and recover earlier losses against both the US and Australian dollars.
Over the last seven days GBP/EUR has recovered from €1.1451 to hit highs of €1.1741 while GBP/USD returned to trading in the region of $1.2526 after dropping to lows of $1.2385. GBP/AUD also bounced back from its worst levels of AU$1.6185 to trend in the region of AU$1.6470.

But can the pound’s run of gains continue? If these reports show that the UK economy closed out the first quarter of 2017 in a strong position, the pound’s recent run of gains could continue.

The pound ended the week on a high thanks to the UK’s latest current account report. One of economists’ big concerns about the post-referendum period was that the current account deficit could spiral, so the news that the shortfall actually shrank from -£25.7 billion in Q3 to -£12.1 billion in Q4 gave Sterling a significant boost.

The UK’s Q4 growth data was more mixed, with the rate of quarter-on-quarter expansion coming in at 0.7% (as forecast) but annual growth being revised down to 1.9%.
The pound’s gains against the euro were also the result of the Eurozone’s inflation stats showing a sharper-than-anticipated slowing in consumer price pressures. The CPI dropped from 2.0% to 1.5% in March.

Wise Money market data

There are quite a few influential data releases to focus on today, including the UK’s manufacturing PMI and the Eurozone’s unemployment figures.
Over in the US we also have the Markit manufacturing and composite PMIs, the ISM manufacturing PMI and the ISM employment report.
The UK’s manufacturing PMI will be followed by its construction and services equivalents later in the week. If these reports show that the UK economy closed out the first quarter of 2017 in a strong position, the pound’s recent run of gains could continue.
As the UK’s services sector accounts for over 70% of GDP, a strong showing from this measure could push GBP exchange rates to new highs.
However, economists have forecast that today’s Eurozone unemployment data will show a decline in joblessness from 9.6% to 9.5%. If that proves to be the case it could undermine some of the recent strength in the GBP/EUR exchange rate. Similarly, upbeat manufacturing data from the US would be US dollar supportive, potentially pushing GBP/USD back below $1.25.

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.