Asymmetric risk on

On Friday it was the unusual correlation between the Japanese yen and antipodean dollars that served to confuse. Yesterday it was the odd mismatch of the safe-haven yen and the equally safe-haven Swiss franc that mystified bystanders: the yen led the field while the franc was in last place.

To be clear, the franc took the wooden spoon only because sterling beat it by 0.1%, ten ticks, no more than a rounding error. Even so, the 1.2% gap between the pair was a big one. It occurred as a result of a successful attack on USD/CHF technical resistance at Fr0.91, which had held since November. Once broken, the next obvious target was Fr0.92, last seen five months ago. Monday morning’s Swiss ecostats made no obvious difference: the 0.5% annual fall for retail sales was not helpful but the SVME purchasing managers’ index at 61.3 was well above forecast.

Sterling’s loss of ground seemed mainly to be the result of a short-term setback in the upward progress of GBP/USD that began after the low in March last year. No damage was done by the UK economic data. The manufacturing PMI scored a two-month high of 55.1 and the Bank of England’s credit statistics showed mortgage lending remaining “robust” in January. The pound nevertheless fell by an average of 0.6%, losing exactly one US cent.

Wins for Germany and the States

Monday’s top manufacturing PMIs were Germany’s 60.7 (Markit) and America’s 60.8 (ISM). Markit’s PMI for the USA was 58.6, half a point lower on the month but still the second strongest in 11 years.

Almost across the board the manufacturing PMIs came in ahead of forecast. Some of that strength arose from supply chain constraints, causing increased lead times on inputs. At the same time, on both sides of the Atlantic, manufacturers reported higher costs, especially for steel, chemicals, plastic and electronic parts. In the States, ISM’s manufacturing prices paid index rose to 86, its highest level since 2008. Canada’s PMI came in at 54.8, towards the upper end of it long-term range.

The other, minor, ecostat topic on Monday was inflation. In Italy, it was 0.6% and in Germany it was 1.3%. The standardised EU measures were 1% for Italy and 1.6% for Germany. They had no effect on the euro, which was an average of 0.3% softer on the day.

RBA holds steady

This morning the Reserve Bank of Australia kept monetary policy unchanged, as expected. Today’s key statistics are consumer price in the Eurozone and fourth quarter growth in Canada. Eurozone inflation is estimated at 1% for February and annualised growth at 7.2% for Canada in Q4.

Australian building permits fell 19.4% in January after a hitting a record high at the end of 2020. The fall coincided with a reduction in the federal grant for house-building. UK house prices went up by 6.9% in the year to February according to Nationwide. The society describes the outlook for the housing market at “unusually uncertain” in view of government support and a potentially weaker labour market.

Other data this morning cover South African business confidence and German unemployment. US vehicle sales come after lunch and tonight brings the first services sector PMIs as well as Australia’s fourth quarter GDP.