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Plucky pound moves ahead

Another podium for sterling

Although the pound was unable to land the win on Monday, it did achieve a respectable second place behind the oil-assisted Norwegian krone with an average gain of 0.4%. There were no data or economic developments to explain its advance, but there was plenty of speculative argument to justify the move.

Perhaps the easiest rationale to swallow was the technical one: A rebound from trend support in the €1.1460 area was effective at the end of February and again last Friday. Tuesday’s rally was simply an extension of that move. An alternative argument was that Brexit has added 2% to GDP, equal to almost £4 billion. Equally subjectively, it could be that the progress of the vaccination programme leads investors to believe that Britain’s economy will be among the first to emerge from the Covid trough.

The only UK economic data to appear came too late to affect the rally. Employment figures this morning were roughly in line with forecast, and contained no unpleasant surprises. The 10k new jobless claims were less than half as many as expected and unemployment dropped back to 4.9%. The pound did not react immediately.

 

Nothing to chase

Amid the barren wasteland that formed Monday’s ecostat agenda there was nothing to cheer or depress investors. They had to create their own inspiration, and they found it difficult. A 1.5% gap separated the leading NOK from the North American dollars at the rear but it was not an exciting gap.

The US dollar is having a torrid time. On three of the last five days it has been at the back of the field and it is April’s weakest performer to date, with an average loss of 2.7%. It was at the back on Monday, sharing with the CAD an average loss of 0.6%. There were no US data to hurt it, and the continued upward trend in Canadian housing starts was not responsible for the Loonie’s lack of success. As with sterling, the mood mattered more than the data and, for the moment at least, the two currencies are out of favour.

Eurozone data for the current account and construction output were uncontroversial. So was the Bundesbank’s monthly report. The euro lost an average of 0.2% on the day, giving up a quarter of a cent to sterling.

 

Another quiet one

Today’s agenda is almost as abbreviated as Monday’s. The two central bank events this morning were anodyne and there are no useful economic data during London’s day.

The People’s Bank of China left its main benchmark interest rate unchanged at 3.85%, where it has been for the past 12 months. The minutes of this month’s Reserve Bank of Australia policy meeting contained no revelations. German producer prices rose 3.7% in the year to March, a little more than expected.

Other than the ECB’s bank lending survey here is nothing else from Europe today, and nothing from North America. The next major release is NZ inflation tonight, followed by Australian retail sales. At seven in the morning the ONS publishes Britain’s inflation numbers.

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