Pound on shaky ground after Unilever announces Netherlands HQ

The announcement that the third-biggest company in the UK was to choose the Netherlands over the UK for its official headquarters caused some jitters for the pound yesterday.

The pound is on mixed form this morning. GBP/EUR has slipped -0.1% to €1.1317, while GBP/USD is flat at US$1.3936. GBP/AUD is also flat at AU$1.7883, but GBP/NZD is 0.2% higher at NZ$1.9206 and GBP/CAD is 0.1% higher at C$1.8216.

Read on to see why the impact of Unilever’s decision upon the pound was largely fleeting…

What’s been happening?

The pound was on rocky form versus the euro and US dollar yesterday, recovering from a midday slump versus the former but returning to the day’s lows versus the latter by the time trading ended.

Sterling was initially shaken by an announcement from Unilever that it would select its premises in Rotterdam to be its sole headquarters rather than its location in London.

While markets initially feared this was a move motivated by Brexit, the consumer goods giant stressed that it was simply an organisational change and that its presence in the UK would remain unaltered apart from the relocating of a small number of staff to the Netherlands.

This reassurance was enough to see GBP/EUR recover its earlier losses and end the day around opening levels, but the reasons for euro weakness were the same as the reasons why GBP/USD slumped back down to the day’s lows by the time trading finished.

For starters, the latest US initial and continuing jobless claims figures both fell further-than-forecast, with initial claims coming close to the 48-year low recorded during February.

Additionally, markets were somewhat relieved that US President Donald Trump had picked Larry Kudlow as his economic adviser, replacing Gary Cohn.

Kudlow supports tariffs against China, but has been vocal in his opposition of blanket tariffs and overall is a supporter of free-trade, which suggests the US may not move towards full-blown protectionism – something economists largely agree would damage the US economy – without the moderating voice of Cohn present in the administration.

What’s coming up?

There is a lack of UK data on the calendar again today, which will likely leave the pound to trade in response to the long-term outlook, which may have improved slightly now that the US seems less likely to lean as far towards protectionism as was feared before the appointment of Kudlow.

The euro may be largely unaffected by today’s finalised Eurozone consumer price index figures for February, unless there are revisions to the data.

Markets may be interested instead in the Eurozone labour costs figures for the fourth-quarter of 2017; rising labour costs would point towards increased wages or hiring, improving the outlook on unemployment and inflation.

Meanwhile the University of Michigan sentiment index is only expected to weaken from 99.7 to 99.3, which may not have too much of an impact on the US dollar.