Portfolio

FX round-up: Sterling slapped lower on Friday after data disappointment

By Andrew Schonberg

Date: Friday 07 Apr 2017

FX round-up: Sterling slapped lower on Friday after data disappointment

(ShareCast News) - Sterling was slapped lower on on multiple major crosses on Friday as unimpressed investors sold the UK unit after a trinity of manufacturing, industrial and construction data disappointed this morning.
This was set against a curtain of higher gold and oil prices after a US missile strike early this morning on a Syria airbase linked to an alleged chemical attack in that country's long-running civil war.

Details of a deadly alleged terror attack in Stockholm, Sweden, were emerging this afternoon. A truck drove into a pedestrian area, with at least three fatalities reported and many more people injured.

At 16:53 GMT, sterling was down 0.59% to $1.2396. It fell 0.32% to €1.1677. The dollar-spot index was up 0.28% to $100.950.

Chris Saint, senior analyst at HL Currency Service, said sterling was under-performing against all its major peers on Friday, lurching lower after the disappointing UK data.

Office for National Statistics data showed UK industrial and manufacturing production worsened unexpectedly in February, along with construction activity fell sharply.

Michael Hewson, chief market analyst at CMC Markets UK, characterised sterling's day as difficult.

He said there were "concerns that the UK economy may well slowing more sharply than initially feared."

Sterling was heavily devalued as a result of the Brexit referendum in June last year, with the currency overly sensitive to any snip of economic or UK-EU divorce news.

The UK currency was also down on the aussie, loonie, kiwi, rand and yen, while the US dollar fell against the loonie and yen but firmed on the rand, kiwi, aussie and euro.

At 16:53 GMT, the greenback was up 0.28% to buy €0.9420. Debt-laden Greece has reached a deal on economic reforms with creditors over its €86bn bailout.

The dollar's Friday form came as traders tried to reconcile a surprisingly low reading on US non-farm payrolls (NFP) for March with a large and unexpected drop in the unemployment rate.

"The jobs report saw the weakest payroll figure since May of last year, putting the future path of US rates in doubt," said Chris Beauchamp, chief market analyst at IG.

"Weather effects took their toll (on the NFP) -- it is probably too soon to make major changes to rate hike expectations," he said.

Hewson added that after the disappointment of the NFP headline number of 98k had worn off, investors focused on the drop in the headline unemployment rate to 4.5%, a ten year low.

"With wage growth remaining steady along with the participation rate there is a case to argue that this would suggest that the US labour market could be on the cusp of tightening up."

That, he said, would make a rate hike by the US Federal Reserve more likely and not less, which helped explain the rebound in the US dollar, after an initial sharp drop.

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