Sterling selling returns
9 March, 2016
Yesterday’s trading was a poor day for Sterling with our currency losing ground against all the major currencies. This comes after a week or so of positive movements, recovering some of the significant drop seen in January. This natural recovery was however purely down to technical reasons and not because of any change in fortunes or forecasts for the pound which remains in a negative trend ahead of June’s referendum. There were many indicators yesterday that the next downward push is imminent and that we have already seen the peak of the recent positive move.
The only main data release during yesterday’s trading was the latest GDP figures for the euro-zone which came in at a better than expected 1.6%, up from 1.5% previously. This boosted the Euro’s value against both the pound and the US Dollar, with GBP/EUR hitting a 1 week low in afternoon trading. This good growth figure may mean that the ECB hold off any further QE at Thursday’s meeting, and with the expected rate cut already priced in, it is looking less and less likely that we will get a favourable spike in GBP/EUR rates, particularly big enough to break through the 1.30 ceiling.
Mark Carney also gave a speech yesterday and although he maintains to take no side in the EU decision to come, he did comment on the positive effect that the UK’s EU membership has had on both economic and financial matters, and indicated that a Brexit was the single biggest domestic risk to financial stability in the years to come.
Before we get to the big announcement of the week, we have a couple more releases to get through today starting with Industrial & Manufacturing production for the UK at 9:30am. In recent month these figures have been falling short of expectations as growth in this sector continues to struggle. Another poor figure could easily trigger the next wave of Sterling selling. At 3pm is the latest NIESR GBP estimate for the UK, and later tonight at 8:00pm we have an interest rate decision in New Zealand.
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