Daily Brief

Incredibly unprecedented

Not QE

On 4 March, the Bank of Canada cut its benchmark by half a percentage point to 1.25%. On 16 March, it took it down by another 50 basis points to 0.75%. And last Friday, the BoC lowered its target for the overnight rate by another half-point to 0.25%. The Loonie strengthened against the US dollar.

The BoC rate cut came days after news that unemployment had jumped by a million and that 44% of Canadian households were now affected by job losses or reduced working hours. It was accompanied by a large-scale asset purchase programme intended to support the functionality and liquidity of provincial government funding markets. BoC governor Stephen Poloz preferred not to describe it as quantitative easing.

In other notable developments on Friday, the FTSE100 index of UK equities fell 5.25% and America’s S&P500 was down by 3.4%. Gold celebrated its biggest weekly gain since 2008. The US dollar bemoaned its biggest weekly decline since 2009. Sterling enjoyed its second successive day as top performer among the major currencies, adding 1% against the US dollar and euro despite a downgrade or Britain’s credit rating by Fitch.


Morrison’s subsidy

At the weekend, Australian Prime Minister Scott Morrison announced that the government will subsidise the wages of low- and middle-income workers by up to $750 a week. As in Britain, there will be a delay in delivery but payments will be backdated to 30 March.

News of the subsidy had no immediate impact on the Australian dollar, which lost a cent and a quarter to sterling and held steady against the Swiss franc, sharing fourth place for the day. In joint second place, the NZ dollar was neck and neck with the Japanese yen, down by half a cent.

A 17-year low for oil prices, extended when the Far East opened this morning, sent the Norwegian krone to the back of the field, where it has been on four of the last nine days (it has also had four days at the front).


More history

The bulk of today’s economic data relate to February or earlier, prior to the pandemic’s bite. Only the Dallas Fed’s business index and the consumer confidence measures originated in March.

One of those consumer sentiment surveys, by the University of Michigan, came out on Friday. The index dropped 11.9 points to 89.1, close to the largest monthly decline in 50 years. GfK’s measure of UK consumer confidence comes out tonight. Analysts speculate that it will be eight points lower on the month at -15. The European Commission confidence readings are due at 0900h and will presumably be lower on the month.

The first European data this morning were from Spain, where retail sales were up by an annual 1.8% in February and inflation came in at a provisional 0.2% for March, down from 0.9%. The Bank of England’s credit and mortgage approvals figures showed a six year high in February, but the figures will surely worsen next month. They will be followed by the provisional German inflation numbers for March.

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