Partial rebounds

After four days on the ropes sterling made at least a temporary escape on Monday. It found its way to the front of the pack with an average gain of 0.4%. There were no UK ecostats to affect the pound yesterday: those released overnight and first thing this morning were vaguely helpful.

The pound’s partial recovery was not a surprise. Even the most assiduous sterling bear would struggle to justify selling it again and again in the absence of new and compelling reasons. It is also fair to imagine that, after four consecutive daily gains, the temptation to take profits would have been pressing.

Today’s UK ecostats began well, with the BRC’s report that like-for-like retail sales in March were 20.3% above the same (locked down) month last year. More relevant, according to the BRC, is that sales last month were up by 8.3% from March 2019. The numbers at 0700h this morning were mostly better than forecast and gave the pound a modest lift. Gross domestic product was estimated to have grown by 0.4% in February after falling by a revised 2.2% in January, a smaller decline than the 2.9% previously thought. Manufacturing and industrial production increased by 1.3% and 1% respectively in February, both more than expected. The balance of payments data showed the deficit in goods widening by more than expected to £16.4 billion. Exports to the EU rebounded by 46.6% after plunging in January: the partial recovery left them 15% lower over the two months.

Highly unlikely

Federal Reserve Chairman Jerome Powell said yesterday: “I think it’s highly unlikely that we would raise rates anything like this year”. It was a far less watertight commitment than those which investors have become accustomed to hearing.

Separately, James Bullard, the St. Louis Fed president, linked the central bank’s next policy decision to the mass delivery of Covid vaccine. Whilst he emphasised that it would be inappropriate to tighten policy right now, he said the FOMC “could begin having discussions about tapering its $120-billion-per-month bond buying program once 75% or 80% of the U.S. population has been vaccinated”. Neither Mr Powell nor Mr Bullard suggested that it is now game-on for higher US interest rates. However both gave the impression that it might not be long before the debate goes live. This afternoon’s inflation data might create the spark.

North of the border the Bank of Canada released its Business Outlook Survey for Spring. It showed a continuing improvement in sentiment, though the outlook remains challenging. The Loonie was almost unchanged on average, and seven eighths of a cent lower against sterling.

More surveys

Overnight and today there are another handful of sentiment surveys from the antipodes, Europe and the United States. The most important hard data are the US consumer price index figures at 1330h.

NZIER’s Quarterly Survey of Business Opinion showed “a modest improvement in [NZ] business confidence in the first quarter of 2021, while demand held steady”. NAB’s Monthly Business Survey found Australian business conditions at a record high, “driven by strong increases in all sub-components – which are now also all at record highs”. This morning ZEW reports on investor sentiment in Germany and the Eurozone, and the NFIB prints its index of US small-business optimism.

Tonight brings yet another sentiment measure; Australian consumer confidence. The Reserve Bank of New Zealand will reveal its monetary policy decision, which is expected to result in no change to interest rates.