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Sterling dodges a bullet

I can't believe it's not battered

Sterling was beaten by the rand yesterday and flat against the Canadian dollar. However, it moved ahead of the other major currencies, strengthening by an average of 0.3%. It did so despite parliament rejecting all four Brexit options in its exploratory "indicative" votes last night.

The pound did indeed fall when the result of the ballots was made known around 2200h. Although the authors of the four proposals had made impassioned appeals for compromise, the majority of MPs voted along party lines. In three cases the margins were narrow and the most votes went to Motion E, which called for a "confirmatory vote" (don't call it a referendum) on whatever deal or no-deal eventually emerges.

Investors were not happy with the outcome but neither were they appalled.  Sterling dropped three quarters of a cent before recovering half that loss.  The pound's relative overall success was the result of its steady climb through the London session, which was helped on its way by the UK manufacturing sector purchasing managers' index touching a 13-month high at 55.1.

Outbreaks of gloom

Some of Monday's economic data exceeded investors' expectations.  Most fell short. Britain's manufacturing PMI and one of the two from the United States, as well as US construction spending and Australian building permits, fell into the former category. The rest appeared in red on the screen.

All of the euro zone manufacturing PMIs came in below the breakeven point at 50 and Switzerland only just squeaked over the bar at 50.3. Again it was Germany that put in the poorest showing. The 44.7 provisional reading of ten days earlier turned into a finalised 44.1, an 80-month low. The flash estimate of Euroland inflation edged down to 1.4% and unemployment remained unchanged at 7.8%. The euro lost half a cent to sterling.

The US dollar lost a quarter of a cent. It was not helped by US retail sales, which fell by 0.2% in February instead of increasing by 0.3% as analysts had predicted. The two American manufacturing PMIs were contradictory:  Markit's was half a point lower at 52.4 while the ISM announced a one-point improvement to 55.3.

Five-hour argument

It is widely reported that the prime minister will host a five-hour cabinet meeting today. On the ecostat agenda Britain delivers the construction PMI, the US reports on durable goods orders and tonight brings Australian retail sales and trade balance as well as services PMIs from Australia and China.

This morning the Reserve Bank of Australia left its Cash Rate unchanged at 1.5%, as expected. The Aussie weakened on the news, presumably because the RBA statement noted that "downside risks have increased". Swiss inflation accelerated to 0.7% in March.

The UK construction PMI is forecast to be a touch higher on the month but still shrinking at 49.8. US durable goods orders are expected to have fallen 1.8% in February. Five hours of Brexit, good grief.

GBP Loses early gains after parliament votes

GBP Loses early gains after parliament votes

USD Not helped by retail sales fall

USD Not helped by retail sales fall

EUR Weak data cost it half a cent

EUR Weak data cost it half a cent

AUD Lower on RBA's downside risks

AUD Lower on RBA's downside risks

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