US holiday saps activity
The week got off to a slow start, not only for sterling but for most currencies. The Martin Luther King holiday in the United States contributed to the calm, as did a complete lack of economic statistics during London's day.
After Friday's whitewash, there had been some concern that sterling would take another beating, and that was the sense as London got going yesterday morning. However, within a couple of hours the bears had backed off, perhaps fancying that there might be better opportunities later in the week; for example, today's employment data or Friday's provisional purchasing managers' index readings.
The effect, then, was that the pound came close to taking first place among the majors. The Japanese yen beat it only by the narrowest of margins and sterling added an average of 0.3%, picking up a fifth of a cent each from the North American dollars, the euro and the Swiss franc.
Sterling aside, the broad shape of exchange rates suggested a reduced appetite for risk among investors, with the Norwegian krone to the rear and the antipodean dollars not far ahead. But not every development pointed in that direction.
One that did was the International Monetary Fund's updated World Economic Outlook. The IMF estimates global growth at 3.3% in 2020, a tenth of a percentage point less than last October's projection. It puts UK growth at 1.4% this year and 1.5% in 2021, a little better than the 1.3% and 1.4% projected for Euroland. Another off-putting development was the spread of new coronavirus in the Far East. The 2003 SARS outbreak "imposed widespread economic costs across Southeast Asia" and the obvious concern for investors is that this latest iteration could do likewise.
On a more positive note, the Bank of Japan raised its growth forecasts when it left monetary policy unchanged this morning. There was also a promising meeting between the French and US presidents. The two leaders held back from escalating a trade war sparked by France's proposed "digital tax" on firms such as Google and Facebook. The euro was unchanged against the US dollar.
Jobs and wages
This morning saw the release of better-than-forecast UK employment data, while the ZEW's surveys of German and Euroland investor sentiment is expected later. With next week's Bank of England (BOE) policy meeting in mind, investors were delighted with wages rising by 3.2% annually.
The UK also saw a 200k increase in jobs, with employment data as a whole comparing well with last week's inflation readings; 1.3% for CPI and 2.2% for RPI. The hopes from investors is that this will ease the economic concerns of the BOE in the build-up to their rate cut decision on January 30th
From August's trough at -44.1 the ZEW measure of German economic sentiment has improved four times on the trot and today's reading is supposed to be higher again, up from 10.7 to 15. Analysts are less bullish about the equivalent measure for pan-Euroland, which might not match up to the previous month's 11.2, but investors care more about the figure for Germany alone. The two other ecostats on the list cover Canadian manufacturing and, tonight, Australian consumer confidence.