|
Market seizes on 'double-dip' comment
|
- Canadian dollar closer to parity with USD
- No figures at all at all today
Good morning. The Times tells us that the Home Office has hired Ruby Wax. Her part-time job there is to improve civil servants' skills in leadership and communication, thereby making them more influential in their work. Cynics complain that the last thing the Home Office needs is yet another over-priced comedian. However, the department defends its decision. It says it considered employing the hugely influential ex-minister Stephen Byers but felt his £5,000-a-day fees were too high.
Maybe the Home Office should have gone knocking on the doors of MPC members. Either collectively or individually they wield great influence. Andrew Sentance was wielding it to significant effect on Thursday and Friday. His speech on Thursday to the British Chambers of Commerce was something of a dress rehearsal, with a seemingly innocuous phrase hidden away in one of the closing paragraphs. Mr Sentence said 'we should expect to see some variability in growth rates, both at home and abroad.' It was not even slightly controversial, but when he said very much the same thing in an interview with CNBC he set the cat among the pigeons. The way he put it this time was that 'you have to recognise there is some risk of a double dip...' The sky went black and sterling had been hit by thunderbolts at least once before he got chance to finish his sentence with '...but that's not the central forecast.' Central forecast? Who cares about central forecasts? There's nothing emotive about central forecasts but double-dip recession; now that's a different matter.
It would be fatuous to argue that investors over-reacted to Sentance's sentences. That is what they do for a living. You don't have to agree with the logic of a particular move to get involved with it; you just have to recognise that it is important. Woe betide the investors who ignore a market reaction because it is unjustified. Sometimes they will come out on top of the trade but more often they will get run over. There is a limit to how long it's worth picking up pennies on the M1 when a big truck is heading towards you. On Friday that truck demolished more than two cable cents, two yen, a cent each against the Aussie and NZ dollars, one euro cent, and two and a half Canadian cents.
For sterling/euro the pressure was mitigated by the ongoing soap opera, playing in Brussels and directed by Berlin. Chancellor Merkel could not be putting it more plainly that 'das its mein Geld' and that Athens has more chance of getting the Greeks to pay income tax than it does of receiving a handout from Germany. The Netherlands says much the same thing but puts it in a less Teutonic way. Push will come to shove later this week when EU heads of government meet to put the seal on yet another of their interminable agreements to do nothing about it.
It looked at one point on Friday as though the Canadian dollar would be the star. The day's only economic data were those for Canadian inflation and Canadian retail sales. First up were the consumer price index figures, which showed 'core' inflation accelerating from +2.0% to +2.1%, a considerably higher outcome than the forecast +1.7%. The Loonie jumped sharply, bringing it within a cent of parity with the US dollar. Strong retail sales data an hour and a half later threatened to extend the rally but investors quickly decided that a quiet Friday afternoon was not the right time to be overly ambitious. The Canadian dollar subsided to where it had begun the day against the USD but held onto its gains against the ailing pound.
There are no ecostats of any consequence today, from anywhere. Central bankers' speeches will probably be the main drivers, together with speculation about what taxes the British chancellor might spring on his unsuspecting public in this week's budget. There is nothing out there guaranteed to prompt a new bashing for the pound but accidents do happen.
|
|
