Sterling Rally Halted

23 February, 2017

Simon Eastman

Yesterday saw the rapid gains that the pound made on Tuesday drop right back by a cent as a mix of better than expected Euro data and poor UK figures caused investors to cash out previous gains.

It was a busy day of eco stats starting off with German IFO business climate figures which posted higher than forecast and Italian inflation which showed improved across the board, with last month’s figures also revised up. Then it came the turn of the UK as we saw GDP released but unfortunately with the figure coming out 0.2 percent under the expected 2.2 percent, the pound crash continued with vigour, despite there being a slight increase in the forecasted QoQ reading showing at 0.7 percent.

Elsewhere, EU inflation came out as expected and Canadian retail sales posted a disastrous reading of negative 0.5 percent compared to the 0 percent change expected and revised down last month’s readings too. This meant the Loonie was one of the only major currencies the pound fared well against, gaining ¾ cent over the afternoon’s trade. The US dollar remained stagnant against sterling for the rest of the afternoon with no critical data released as markets awaited the speech from Fed member Powell and the FOMC minutes from the last meeting. Following the minutes, where the Fed kept rates expectantly unchanged, the dollars earlier gains were reversed as the minute’s contents, although showed the FOMC were holding the door open for further rises, markets lowered their expectations of a March rate rise.

Today we have a fewer data-heavy day but some key releases with German GDP out first thing and Swiss industrial production in the morning, followed by lunch by US jobs data, house price figures and speeches from Fed member Lockhart. The UK has nothing of note to report on so expect another day of potential volatility for anyone buying currency with sterling as events elsewhere dictate movement.