Daily Brief

Starting to get busy

4 minute read

Placid pound

The second May bank holiday in Britain and Memorial Day in the United States combined to crush any potential for excitement on Monday. Sterling was left to bask in last week’s glory, which it seemed to enjoy. Over the four-day weekend sterling shared second place behind Norway’s oil-powered krone.

Monday’s most unexpected move was the US dollar’s half-cent plunge in mid-afternoon. There were no US economic data or news to justify the move. It is possible that it was the result of clumsy month-end positioning in an extremely thin market. With London and New York out of the game it would not have needed a huge order to cause the drop.

The US dollar was almost the weakest performer over the four-day weekend too. It lost an average of 0.2%, beating only the Swiss franc by a nose. Sterling was just about unchanged on average. More importantly, it was the top major currency performer in May, strengthening by an average of 1.7%. In the year to date only the Canadian dollar has had a better run.


No big numbers yet         

Although the coming four days should provide rich pickings for ecostat enthusiasts, the last couple did not bring a great deal to the table. There were no important numbers on Friday and only a handful yesterday. The pace will pick up with the purchasing managers’ indices and US employment figures this week.

Among the data that did not make much difference on Friday, Norwegian retail sales beat forecast with a 0.3% rise; French gross domestic product disappointed with an estimated 0.1% shrinkage in the first quarter; the EC’s measures of European confidence all improved in May; US personal income and spending “was impacted [distorted] by the continued government response to COVID-19” as handouts were reduced in April; the Michigan index of US consumer sentiment was in line with forecast at 82.9. Interestingly, Michigan University saw fit to mention that “customers expect a surge in inflation” as demand outpaces supply.

On Monday, ANZ’s New Zealand Business Outlook noted broadly softer confidence and activity indicators. Echoing the Michigan report, it observed that “cost-push inflation pressures continue to intensify across the economy”. The first couple of Chinese purchasing managers’ indices showed factory activity expanding at the fastest pace this year, with services a touch higher at 55.2.


Lots of PMIs

The start of the month, the start of the PMI deluge. Australia’s Performance of Manufacturing Index at 61.8 was not quite a record high but it did mark an eighth consecutive month of recovery. Nationwide’s report of a 10.9% annual rise in house prices was not a record either. It was, however, the fastest pace of growth in almost seven years.

Away from the PMIs, the Reserve Bank of Australia announced this morning that it had left monetary policy unchanged. The statement toed the now-familiar central bank line that the “pick-up in inflation and wages growth is expected… to be only gradual and modest”. The AUD took a pace back on the news, though it is just about unchanged on the day. Swiss GDP fell 0.5% in Q1 after growing 0.1% in the fourth quarter of 2020. SECO described Switzerland’s recovery as having been “interrupted”.

For the rest of the day it is wall-to-wall PMIs, mostly for the manufacturing sector. There will also be GDP readings from Italy, Canada and, tonight, Australia. At teatime today Bank of England Governor Andrew Bailey will deliver a morally-uplifting virtual speech about “Building a Finance System Fit for a Clean, Resilient and Just Future”.


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