BoE’s Vlieghe Heralds Pick-up in UK Wages, GBP Exchange Rates Struggle to Capitalise
Pound (GBP) exchange rates remained within a narrow band on Monday morning, failing to capitalise on upbeat comments from Bank of England (BoE) policymaker Gertjan Vlieghe as well as news that UK Prime Minister Theresa May is headed to Ireland to help support the restoration of a power-sharing executive.
Speaking on Monday at an event hosted by the Resolution Foundation think-tank, Gertjan Vlieghe discussed the pick-up in UK wage growth and the building strength in the global economy.
Vlieghe claimed that there was ‘increased evidence that tight labour markets are finally starting to have some upward effect on wages’ whilst also asserting that households’ burgeoning consumer debt should be an indication to the BoE’s Monetary Policy Committee (MPC) a recovery in spending is underway.
The Pound was rather slow to react to this news, however, perhaps because of the recent statement from the central bank that a rate hike will likely be dependent on progress being made in Brexit negotiations.
On this front, May’s trip to Ireland will also serve to underline the ongoing push for a deal regarding the Irish border, with any progress liable to help bolster the Pound.
Looking ahead, Tuesday will see the release of the UK’s latest inflation figures, with a drop in consumer prices liable to limit Pound (GBP) exchange rates and a rise likely to provide a small boost.
GBP/EUR Exchange Rate Trades Narrowly as Martin Schulz Steps down From Germany’s SPD
The Pound Euro (GBP/EUR) exchange rate remained mostly unchanged on Monday morning as markets reacted to a lack of significant ecostats.
Investor attention has remained on Germany, however, with news that Social Democrat (SPD) leader Martin Schulz will soon be handing over leadership of the party to Andrea Nahles.
Schulz announced his intentions last week after backpedalling on his plans to become Foreign Minister – giving up on his ministerial ambitions after facing condemnation from his own party.
This appeared to be an effort to unify his party ahead of the SPD’s vote on a coalition with Angela Merkel’s Democrats (CDU), with dissidents and fractured internal relations seen as liable to scupper plans for any ‘grand coalition’.
Looking ahead, Wednesday will see the Eurozone’s GDP figures and Germany’s consumer price index – highly significant releases that could make or break the GBP/EUR exchange rate.
GBP/USD Exchange Rate Climbs Ahead of Trump Infrastructure Plan Reveal
The Pound US Dollar (GBP/USD) exchange rate inched ahead on Monday morning, gaining ahead of the revealing of President Donald Trump’s massive infrastructure spending plans.
President Trump will unveil his highly-anticipated infrastructure proposal today, a $1.5tn scheme that is expected to fulfil a number of his campaign goals.
The plan is expected to use $200bn in federal money to effectively leverage local and state tax dollars in order to fix America’s ageing infrastructure, including the likes of roads, airports, highways and ports.
President Trump touched on his infrastructure intentions in the State of the Union address, saying:
‘Every federal dollar should be leveraged by partnering with state and local governments and where appropriate tapping into private sector investment to permanently fix the infrastructure deficit.’
The POTUS has also repeatedly pointed to the crumbling US infrastructure as an encumbrance on the American economy, with many hopeful that spending on this front will eventually bolster US economic growth.
There are concerns, however, that this proposal will struggle to make it through such a polarised Congress – with markets still wary after two government shutdowns in such a short space of time.
This, combined with uncertainty ahead of the reveal, has limited the ‘Greenback’s potential this morning.
GBP/CAD Exchange Rate Inches Ahead as Canadian Unemployment Rises
The Pound Canadian Dollar (GBP/CAD) exchange rate nudged higher on Monday morning, capitalising on last week’s disappointing Canadian employment readings.
According to Statistics Canada, the economy shed a whopping 88,000 jobs in January – the biggest one-month slide in nine years – with most of the losses concentrated in part-time work.
This pushed Canada’s unemployment rate up to 5.9%, up from the previous period’s 5.8%, exceeding the market forecast of 5.7%.
In other news crude oil prices have now begun to climb slightly, with global markets rebounding from last week’s round of selling.
The ‘Loonie’ has, thus far, been unable to capitalise on this news however.
GBP/AUD Exchange Rate Limp as AUD Capitalises on Weaker US Dollar
The Pound Australian Dollar (GBP/AUD) exchange rate remained limp on Monday with the Australian Dollar (AUD) gaining on a weaker US Dollar.
Markets will be keen to assess Australian employment data, out on Thursday, as well as tonight’s ANZ Roy Morgan weekly consumer confidence reading and Tuesday’s NAB business confidence and conditions readings.
Furthermore, the market reaction to US President Trump’s investment plan today could bolster or limit the Australian Dollar, with a positive reaction likely to support the US Dollar and a negative one liable to put increased pressure on the GBP/AUD exchange rate.
GBP/NZD Exchange Rate Extends Lead on Dovish RBNZ
Last week’s dovish Reserve Bank of New Zealand (RBNZ) monetary policy decision continued to limit the New Zealand Dollar on Monday, with analysts at Westpac explaining that the RBNZ is not expected to go for a rate hike this year.
The RBNZ has also indicated that in order to meet their inflation target they require a certain level of GDP growth that might only be attainable if they lower the official cash rate.
In this sense, surprisingly weak GDP growth in New Zealand could prompt a rate cut from the RBNZ, though this will, of course, be dependent on other factors including inflation and wage growth.
Looking ahead, the primary data event to watch this week will be the New Zealand Business PMI, with a reading above the 50-point mark that divides contraction and growth liable to help support the ‘Kiwi’ Dollar.