Better lucky than good
In a handy finish to the week, sterling shared first place among the majors on Thursday and Friday. On Thursday it was a five-way split with the CAD, AUD, NZD and NOK. On Friday the pound only had to share with the JPY, with the USD snapping at their heels. Luck had a lot to do with it; economic fundamentals did not.
Chancellor Rishi Sunak’s Winter Economy Plan, revealed on Thursday, met with a mixed reception. Although the heads of the TUC and CBI stood supportively beside the chancellor ahead of his announcement, their constituents are less than wholeheartedly enthusiastic about the plan and most of the gaps left by furlough still remain. There was no instant help for the pound, and in most cases it was not until Friday that it moved above Thursday morning’s levels.
Whilst they were by no means rubbish, the UK economic data did few favours for the pound. The CBI’s Distributive Trends Survey found retail sales growing at the fastest rate since April last year but at 11 the reading was still well off the pace. Consumer confidence improved by two points to -25, still below most of the last seven years’ readings. Public sector borrowing was fractionally more than expected in August, and at £35.9 billion was the third highest since records began in 1993. The Bank of England’s Quarterly Bulletin focused on the tragic Covid-19 pandemic and concluded, unsurprisingly, that risks are “skewed to the downside”.
The only notable currency mover on Friday was the Norwegian krone, which lost an average of 0.5%. In the last few days the NOK has suffered a fair amount of buffeting, leading on one day and coming last four times. It is 3.8% lower on the week, while the USD at the front is up by 2.5%.
US ecostats at the end of last week put both initial and continuing jobless claims at higher than expected levels. New home sales continued their relentless rise, albeit at a slower pace. In the last four months sales have gone up by more than 65%. Friday’s durable goods orders were respectable. Headline orders were up by 0.4% while non-defence orders excl. aircraft increased by a monthly 1.8%.
Away from Britain and the States, the ecostats were fairly humdrum. Australia’s trade figures showed an all-round decline, with exports falling 2% and imports down by 7% in August. Italian business and consumer confidence both improved in September.
This week got off to an entertaining start with the revelation in the New York Times of the President’s tax records. He apparently paid $750 (£587.40) income tax in 2016 and 2017 and none at all in 10 of the previous 15 years.
Whether this was an administrative error or that he has been less than scrupulous in declaring his income, the news could be theoretically negative for the dollar, but there has been no reaction as yet.
In Britain, or more accurately in Brussels, another make-or-break week has begun for a post-Brexit agreement with the EU. The Prime Minister’s right-hand-man Michael Gove will meet Vice President Maros Sefcovic today in preparation for the resumption of formal negotiations tomorrow.