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Still lacking direction

Taking the pound for a walk

The Ever Given container ship eventually got moving on Monday but the FX market failed to follow its example. Less than 1% separated the leading NOK and NZD from the trailing SEK and JPY. As those mismatched pairs show, it was clearly not a matter of risk-on or risk-off.

That is not to say there were no risk issues for investors to consider. The unblocking of the Suez Canal ought to have been a positive for risk-appetite, though it was not obvious from the 3% rise in oil prices. The precipitate multi-billion-dollar unwinding of a hugely leveraged hedge fund should have been negative, but the safe-havens felt no advantage. If anything, the lack of reaction was yet more evidence that investors have little idea what to do with currencies.

Somebody did have an idea about sterling on Monday morning. They decided shortly after the open to attack the GBP/EUR resistance just above €1.17 that has held sterling back for more than a year. Sure enough, they blew through it and the pound traded briefly above €1.1750 for the first time since February last year. But the market did not get behind the move, and by the end of the day sterling was back down to €1.17. It is, on average, unchanged on the day, flat against the USD and CHF and a fifth of a cent firmer against the EUR.

 

Buy houses, repay loans

The Bank of England’s Money and Credit report was much as expected. Net mortgage borrowing in February was the strongest in five years, while households continued to pay down consumer credit and build bank deposits.

The anticipated ending of stamp duty tax relief at the end of March (now extended to the end of June) encouraged house buyers to borrow an additional net £6.2 billion of mortgages. Gross mortgage lending of £27.7 billion was close to the £27.9 billion taken out in March 2016. The number of mortgage approvals in February was 87.7k, fewer than the 103.7k peak last November but well above the 67.3k average in the six months to February 2020.

In the States, the Dallas Federal Reserve reported that manufacturing activity in its region accelerated sharply in March. The manufacturing index jumped almost 12 points to 28.9, its highest level since August 2018. “The production index, a key measure of state manufacturing conditions, surged 28 points to 48.0, its highest reading in the survey’s 17-year history.”

 

Houses and prices

The statisticians will not be unduly busy today but they will at least be girding their loins for the rush of data that arrives in the following two days. None of today’s data are of great importance.

New Zealand kicked the day off with building permits for February. At 39.7k they were down by a monthly 18.2%. Economists, nevertheless, say there is “still plenty of momentum left in the residential construction boom”. There is more on housing this afternoon when S&P reports on US house prices.

European data this morning cover Spanish inflation and retail sales, Norwegian retail sales and German inflation. There are confidence measures for almost every aspect of the euro area, courtesy of the European Commission. After lunch there is also the Conference Board’s measure of US consumer confidence.

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