AUD rebounds after ‘as expected’ GDP
The Australian economy grew by 1.5% in the year to December. That is down from 2.1% in the year to September but slightly above the market forecasts. In addition, Aussie retail sales grew by 1.1% in the month of February, a partial rebound on the surprisingly negative January figure of -2.1%. The effect of this data was a drop of half a cent in the GBP/AUD rate. That pair starts the day at AUD 1.9595 in the UK trading hours. We will see Australia’s trade balance and some home loans data overnight tonight but, in the meantime, the UK chancellor of the exchequer will deliver a budget and gawd only knows what that will do to the value of the pound.
Sterling steady rise ahead of UK budget
The pound is on a gentle upward trend against the US dollar, the euro and other currencies ahead of today’s UK budget. It was aided by solid UK purchasing managers indices. These were marginally lower than the previous month but the February data was still comfortably in the growth zone, with the service sector PMI coming in at 53.8 and the Composite Index printing at 53.0. There is every likelihood that Chancellor of the Exchequer, Jeremy Hunt will deliver cuts in National Insurance and perhaps other taxes and is likely to outline support for businesses in order to try to get the UK economy performing again. Whether this will be enough to give the pound a further boost is an open debate right now. However, sterling starts today at USD 1.2720 and EUR 1.1700.
BOC ‘on hold’ expected
It is highly likely the Bank of Canada will leave the Canadian base rate on hold at 5.0% when they meet this afternoon. If so, that will be the fifth meeting in a row where the base rate has remained flat. Understandably, with Canadian data looking fairly mixed at the moment, all traders really want to know is when the Bank of Canada will start to reduce the cost of borrowing and give the economy a chance. Right now the GBP/CAD rate is up to the highest level we have seen since July 2023 at CAD 1.7290. You have to look all the way back to February 2022 to see this pair above 1.73 so a break of that level could well be significant and would open the door to levels around 1.76.
Fed Chair’s testimony in focus
The chairman of the US Federal Reserve will be delivering A testimony to Congress this afternoon. Jerome Powell will be grilled over his handling of the economy and many are very concerned that the Fed is maintaining the cost of borrowing at too high a level for too long. Undoubtedly, he will be asked about the timing and rapidity of any interest rate cuts The Fed may be contemplating. Ahead of his testimony, The US dollar has lost some ground, allowing the pound to push up to $1.2720 and the Euro to make gains to $1.0865.