GBP in focus!
The data calendar remains light today with rhetoric and sentiment continuing to dominate. In that regard it is GBP that has had the majority of the press and speculation and in turn has been the major FX focus of the day so far.
The major releases of the day have come from the UK: The RICS house price balance slipped in February to +17%, from +31% in January. The balance remains positive (with more surveyors expecting house prices to rise than fall over the coming period) but notably less so than December of January. In the detail of the report however there is evidence that activity is starting to pick up with new buyer enquiries and (to a greater degree) new instructions both rising; UK retail sales recovered in February, from the weather related slide in January, however the base effect of a very weak January last year take some of the shine off the bounce.
Press releases overnight added to the negative sentiment of GBP with a Times report that “Labour and Tories are neck and neck” reigniting hung parliament fears and credit rating agency Moody’s suggesting that Britain faces a tough balancing act in deciding how and when to reduce support for the banking sector. (implying that some of the UK’s banks may see their bond ratings downgraded once the implicit support from the government guarantee is removed.)
Further data from the UK this morning also showed that the January Trade deficit widened again to its highest level since August 2008 (despite a lower revision to the December deficit). With no direct evidence that the figures were affected by the adverse weather in January, the distinct lack of pass through from the lower level of GBP continues to bemuse.
Fitch Rating agency has also been on the wires this morning highlighting the uncertainty surrounding the deficit reduction plans in the UK in the light of the impending general election. GBP will continue to face some intermittently stiff headwinds whilst the political landscape and by default a clear deficit reduction plan remains unclear!