Sterling under pressure as the General Election campaign begins in the UK

Enrique Díaz-Álvarez31/Mar/2015Currency Updates


A mostly uneventful day for cable saw Sterling end trading 0.2% lower on the Dollar having traded within a narrow band for most of the London session. The election campaign is now officially under way in Britain. With parliament dissolved, the five-and-a-half week campaigning begins in earnest ahead of the crucial General Election in May. We expect the huge levels of uncertainty surrounding this year’s election to weigh on the Pound in the coming weeks.

In terms of data releases, approvals for mortgages in the UK climbed to a six month high last month. Mortgage approvals rose from 60,707 to 61,760 to mark the third consecutive monthly increase, suggesting the slowdown in the UK housing market could be receding. Despite this, approvals still remain 18.1% below its peak in January last year. Elsewhere, the Bank of England’s net lending to individuals rose broadly in line with expectations to £2.5 billion, although consumer credit declined to £740 million from a revised £802 million. The Bank of England also announced a new set of stress test for Britain’s banks, including their ability to cope with a dramatic slowdown in China, a Eurozone recession and UK interest rates being cut to zero.

A further revision of economic growth for the final quarter of last year is expected to show growth of 2.7% YoY when released by ONS at 9.30am this morning.


Monday saw limited volatility in the single currency with the Euro finishing the day 0.1% lower on Greenback. Another week of uncertainty faces Greece, as Athens struggles to persuade its creditors to unlock bailout funds before it runs out of money next month.

Concerns of a deflationary spiral in Europe’s largest economy appear to have dissipated yesterday after the consumer price index in Germany ticked upwards to an annualised 0.3% in March. While still well below the 2% target, it is significantly higher than in January, when inflation fell into negative for the first time since 2009. However, with oil prices set to weigh on the headline rate in the coming months, a dip back into deflation cannot be ruled out. Economic sentiment continued to climb upwards this month, increasing above expectations from a revised 102.3 to 103.9, while industrial confidence and services sentiment both rose on last month to -2.9 and 6.0 respectively.

A busy day in the global economies begins in the Eurozone this morning with the announcement of the unemployment rate for Germany at 9am and Eurozone inflation at 10am, both GMT.


The Greenback showed broad strength against most of its major peers on Monday after a series of mostly positive data. The US Dollar index ended London trading 0.2% higher.

The level of personal income, a measure of total income received by individuals in the US, surprised on the upside in February, up by 0.4% month on month. Consumer spending rose modestly by 0.1%, with this year’s harsh winter weather causing consumption to stutter. When adjusted for inflation, consumer spending actually dropped in February by 0.1%, the first monthly decline in real spending since April last year.

The forward gauge of US home sales, known as pending home sales, rose in February to its highest level since as far back as June 2013. The National Association of Realtors index climbed by 3.1% month on month and by an annualised 12%, suggesting the housing market is starting to find its feet this year. A strengthening labour market and stable mortgage rates have seen overall home sales improve in the US so far in 2015.

An equally hectic session in the US will be focused on consumer confidence data for March at 3pm this afternoon, London time.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.