City should plough its own furrow
Investors did not even bother to search for exciting or controversial news and data on Wednesday. They understood from the off that it would be a fool’s errand. Sterling shared the lead with the Swiss franc. The NZ dollar and Norwegian krone came last. They were down by 0.3%, the equivalent of a third of a euro cent.
In the midst of the tightly-bunched currency field, the USD, EUR, JPY, CAD, AUD and SEK were just about unchanged against one another, 0.2% behind the GBP. So it was a win for sterling, the second in five days, but not exactly a famous victory. The NIESR failed to come out with its GDP estimate for the January quarter (it is now pencilled in for Friday) so there were no UK ecostats until the RICS housing price balance appeared at midnight. At 50%, the headline reading indicated that prices were neither rising nor falling.
In his online “Mansion House” speech, the Bank of England Governor focused on “the future of financial services, and the important role they play in our economy and internationally”. Not for the first time, Andrew Bailey made the case that Britain should avoid any temptation to line up regulation of the City solely with the EU’s rules: “This must be a global, not a regional, regime to be effective.” The governor made no mention of monetary policy.
Wednesday’s supposedly headline act, the US consumer price index data, failed to grip its audience. Prices went up by 0.3% in January and they were 1.4% higher on the year both with and without food and energy.
For many commentators, the takeaway from the inflation data was an almost surly acknowledgment that inflation remains low, “for now”. The idea of an inflationary spike just around the corner has gained credibility in the last couple of weeks, to the extent that key figures such as Bill Dudley are feeling the need to warn about it.
Others disagree, notably those at the axis of Federal Reserve policy-setting. Chairman Jerome Powell said in a speech last night that employment, not inflation is the central bank’s priority at the moment. Interest rates will not begin to rise until the objective of “broad and inclusive” full employment has been met.
Output, trade and growth
Sterling’s big day comes on Friday, with UK data for manufacturing and industrial production, the balance of trade and fourth quarter gross domestic product. The focus today will probably be the weekly US jobless claims numbers.
Today began with unremarkable data for NZ electronic card retain sales and German wholesale prices. Sales were up by 1.9% and prices were flat on the year. Analysts expect to see 757k new US jobless claims and 4.5 million continuing claims.
New Zealand opens the batting on Friday with the Business NZ performance of manufacturing index. Australia follows with new home sales for January. The swath of UK ecostats appears at the Covid-adjusted time of 0700h, accompanied by Norwegian fourth quarter GDP. There are inflation figures from Switzerland and Spain. North America offers Canadian wholesale sales and the provisional Michigan index of consumer sentiment.