Look, a free lunch!
After much fanfare, Chancellor Rishi Sunak set out on Wednesday his latest measures to support employment and stimulate the British economy. Astonishingly, not everyone approved of his plan. Less surprisingly, Mr Sunak’s not-a-budget made not the slightest difference to sterling at first. The currency market gave an initially muted response, but this morning it appears that analysts are feeling more optimistic about the package of measures.
The chancellor’s £30 billion handout brings the total to about £166 billion that he has committed so far to offsetting the economic damage done by Covid-19. It is debateable whether his £1,000 subsidy to bring back furloughed workers is big enough to influence hiring and firing decisions. However, only the most egregious yes-but-what-about critic could not see Mr Sunak’s mini-budget as being of at least some help to the economy. It was all very much in line with what had already been trailed by the Treasury and although it will further inflate the country’s national debt, it will not do so in a disproportionately bigger way than is happening elsewhere.
The pound has also been making gains all week due to rumours that an agreement between the UK and EU on fishing rights was imminent. Analysts believe that the progress of the UK/EU negotiations will be the main driver of the pound’s value in the coming weeks.
Another five-point plan
True to political tradition, when Chancellor Angela Merkel presented her agenda for Germany’s presidency of the Council of the European Union she did so as a five-point plan. Ms Merkel wants to promote “fundamental rights, solidarity and cohesion, climate change, digitisation and Europe’s role in the world.”
The chancellor believes that the second of those objectives will best be served by swift approval of the €750 billion coronavirus recovery package. She continues to struggle with the “frugal four” – the Netherlands, Austria, Denmark and Sweden – who argue that any assistance should take the form of loans, not grants. There was nothing to see or hear that had not been seen or heard before and the euro was roughly unchanged on average.
Wednesday’s economic data were also deeply unexciting. MBA mortgage applications in the United States were up by 2.2% on the week and consumer credit decreased by $18.3 billion in May.
Making up for lost time
After two days of statistical tedium, today and Friday have greater potential. The only UK ecostat is the RICS house price balance which appeared overnight. At -15 it was 17 points higher on the month and well above its -95.1 in the depths of the global financial crisis.
Other data released ahead of London’s opening this Thursday include NZ business confidence which is “bouncing back” and Chinese inflation, a touch higher at 2.5%. Australian mortgage lending fell “sharply” in May, its 15.6% decline was the “largest fall in the history of the series.” The German trade figures showed a smaller than expected recovery, with exports up by 9% and imports by 3.5%. The numbers were supposed to have been 14% and 12% after double-digit falls in the previous two months.
Further down today’s list are Canadian housing starts, and US wholesale inventories and weekly jobless claims. Initial claims are forecast to be well over a million for a 16th consecutive week. On Friday, Norway reports on inflation and there are industrial production data from France and Italy. North American ecostats cover US producer prices and Canadian employment.