Plenty of nothing

Tuesday promised little and did not disappoint. The Eurozone economic data were adequate; US numbers less so. Investors decided against attacking the technically-vulnerable pound and it rebounded from trend support levels. The GBP took a close second place behind the CAD, clustered with a handful of other contenders.

The euro shared last place with the NZ dollar and Norwegian krone, falling by an average of 0.2%. It would be handy to link the decline of the trio with the political shirt-tearing that has stalled Covid vaccine programmes: Norway and the EU have both suspended delivery of the AstraZeneca product. But New Zealand is pressing ahead with the Pfizer/Biontech vaccine, so another excuse is required.

In fairness, it must be admitted that none of the major currencies went very far yesterday. Just 0.5% separated the leaders from the rest of the pack. The pound added an average of 0.2% and was all but unchanged (±0.1% or less) against the USD, CHF, JPY, CAD and SEK. The charitable interpretation is that investors were holding their fire ahead of this evening’s monetary policy announcement from the US Federal Open Market Committee. A harsher assessment would be that they had no idea which way to go.

Soggy retail sales

Yesterday’s statistical highlight, American retail sales, turned out to be even dimmer than anticipated. The supporting US data were ordinary at best. The only joy was to be found in European investor confidence, which improved in March.

Harsh weather carried the can for the disappointing US data. Although analysts had forecast a setback for retail sales in February after January’s stimulus-cheque-induced 7.6% increase, the -0.5% that they had pencilled in looked tame alongside the actual 3% drop. Bitter cold kept shoppers away from Main Street. House builders went back to work in March but their enthusiasm was blunted by higher prices for wood, which can add $24k to the price of a new home. The NAHB index was two points lower on the month at 82.

The best news came yesterday morning from ZEW. Investor sentiment in Germany improved by more than five points to 76.6, within a point of last September’s high. In pan-Eurozone, it was up by more than four points at 74, fractionally ahead of the September peak.

Joining the Fed’s dots

Today’s main event comes at 1830h when Federal Reserve Chairman Jerome Powell answers questions about the future of monetary policy. He will of course avoid making specific commitments, other than offering the reassurance that he is in no hurry to take interest rates higher.

What Mr Powell cannot avoid is analysts’ scrutiny of the “dot plot” included with the Fed’s statement. The expectation today is that it will signal no upward move for rates until at least 2023. Investors will at the same time be keen to see how the Fed’s economists see the recovery progressing.

The only other game in town will be consumer prices. Both the Eurozone and Canada will reveal their latest inflation rates. The Eurozone’s headline rate is forecast to come in at 0.9%, which would represent no change. In Canada they are looking for an acceleration from 1% to 1.3%.