The Pound struggled to attract support on Friday as speculation mounted that Prime Minister Theresa May was planning to give up single market access in order to clamp down on immigration.
Some government ministers have suggested that Britain could still access the EU’s single market by paying into the bloc’s budget, but ex-British EU official Jonathan Faull argues that European leaders will only grant membership of the single market to nations who accept the free movement of people – a claim that EU officials have explicitly made themselves on many occasions. In a week where private sector output printed at its highest level for 17 months, it seems that negative Brexit sentiment was once again outweighing economic data in the minds of Sterling traders.
The Pound fell to its lowest level of 2017 – not that big a deal – on Friday, suffering a decline of around half a cent against the Euro.
Data on the day showed that German retail sales massively outperformed analysts’ expectations, rising from 1.2% to 3.2% in November. The upbeat consumer spending data took the Eurozone retail sales index to 2.3%, which outpaced forecasts of 1.9% and helped drive the single currency higher versus Sterling.
Later this morning Eurostat will release its labour market report for November, which is anticipated to show that joblessness remained at 9.8% in the currency bloc. The Euro could rally if the jobless rate comes in lower-than-expected, however, the common currency could suffer if unemployment is seen to be back on the rise.
The Pound to US Dollar exchange rate plunged by over a cent on Friday as robust US wage data bolstered Federal Reserve rate hike bets.
The unemployment rate rose from 4.6% to 4.7% and the headline non-farm payroll figure, at 156,000, printed slightly lower than forecasts of 175,000. However, demand for the ‘Greenback’ flourished following the afternoon’s labour data because wage growth came in at 2.9%, up from 2.5% previously. The surprise figure marked the largest uptick in wages since 2009 and this helped spur expectations of a further three Fed rates hikes in 2017.
Sterling struck a fresh two-month low versus the Canadian Dollar on Friday following a very strong Canadian jobs report. Analysts had been primed for job losses of around -2,500 but the actual figures showed huge gains of +53,700. This surprise result allowed the commodity-sensitive ‘Loonie’, which was already benefitting from higher oil prices, to rally by around a cent-and-a-half against the Pound.
The Pound to Australian Dollar exchange rate tumbled by around -70 pips on Friday despite the fact that wage gains in America could prompt the Federal Reserve to tighten policy again sooner rather than later, which would probably reduce demand for the ‘Aussie’.
A report early on Friday morning showing that Australia’s trade balance widened from A$1.1 billion to A$1.2 billion in November boosted the appeal of the ‘Aussie’ Dollar and, combined with the latest wave of Brexit anxieties, explains how the Australian Dollar managed to rally versus Sterling.
Fears of a hard Brexit took GBP/NZD lower on Friday, however, Sterling recovered its losses versus the risk-sensitive New Zealand Dollar later on in the day as sturdy US wage data boosted Fed rate hike expectations and, consequently, weighed on global risk appetite.
10:00 EUR Euro-Zone Unemployment Rate (NOV) Medium 9.8%
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