The British Pound had a poor week which started pretty well but then turned sour after a series of soft economic data. As all the non-USD currencies rallied on Monday, GBP/USD jumped exactly a cent from its opening level of 1.4140 to 1.4240. It was steady in Asia on Tuesday but then tumbled to 1.4075 by Tuesday lunchtime in London. By Wednesday morning it had rallied to 1.4200 but was then sold persistently for the next 48 hours, reaching a low on Friday morning of 1.4015; its lowest since March 21st. A very modest rally off the lows saw it close around 1.4025 but the GBP was the worst performer on the week, falling against every one of the major currencies we follow closely here.
The UK housing market continues to soften - especially in London and surrounding areas - and mortgage lender Nationwide said last week that annual house price growth cooled to a seven-month low of just 2.1% in March; well below consensus estimates of a 2.6% gain. Meantime, the Bank of England said the number of mortgages approved for house purchase fell to 63,910 in February from 67,110 in January, well below economists’ forecasts of a smaller drop to 66,000. The Confederation of British Industry’s distributive trades survey, meantime, showed the retail sales balance fell to -8 from +8 in February, confounding a median forecast of +15. The CBI report said, “Against a backdrop of stagnating household incomes and weak consumer confidence, the lengthy cold snap earlier this month has heaped added pressure on retailers… Freezing conditions and transport disruption caused people to avoid the high street. With many forced to work from home, telecoms firms saw record internet traffic, yet on-line shopping slowed sharply given the potential for disrupted deliveries.”
The second revision to the UK’s Q4 GDP numbers on Thursday didn’t contain any surprises, with quarterly growth unchanged at +0.4% and the annual rate at just 1.4% after 1.8% in Q3. Even with the significant depreciation of the GBP after the EU referendum back in June 2016, net trade was still estimated to have subtracted around 0.4% from GBP; a worse performance than after all other big depreciations of sterling in the post-war period. Elsewhere in the details of the report, household spending was estimated to have increased by 0.3%, while business investment increased by 0.3%, rather than held steady as previously thought. The economic data highlights for the week ahead will be the various PMI surveys (manufacturing, construction and services) released between Tuesday and Thursday. The pound ended last week at USD1.4025, GBP/AUD1.8255 and GBP/NZD1.9365.