After leading the other major currencies for two days in succession the pound emerged as the top performer for the week, the month and the year to date. Compared with last Friday's levels it is up by an average of 1.5% and its gains include two and a quarter US cents and one and two thirds of a euro cent. Sterling is close to a 22-month high against the euro.
Other than a small improvement in UK consumer confidence there were no economic data to help the pound along. All of its traction came from what investors perceive to be an improving Brexit picture. Parliament has taken control and is doing its utmost to steer the government away from the cliff-edge Brexit which the prime minister still sees as an option. As has been the case from the beginning, the softer the Brexit, the stronger the pound.
The euro was a bit of a wallflower, sitting quietly by while other currencies attracted investors' attention. Their disregard did the euro no damage: on average it was just about unchanged against the other majors. The euro added a third of a US cent and lost a cent and two thirds to the preeminent pound.
In most cases the European economic data were not helpful to the euro. Last Friday's gross domestic product figures confirmed that Germany's economy stagnated in the fourth quarter of 2018. Fortunately for the euro this was seen as a good thing: negative growth would have meant a technical recession. Euroland inflation was in line with forecast at 1.4% and most of the EC's confidence measures were better than expected. Other than the traditional weekly protest by France's gilets jaunes there were no politically-significant events.
Although there was plenty going on at a domestic level, investors found it impossible to ignore the administration's trade negotiations with China and Trump's quixotic trip to Hanoi. Investors were not surprised that the president's meeting with the North Korean leader did not achieve much. They are more anxious to see a result from the trade talks but there, too, obstacles lie in the way. The most recent story from Washington is that a draft deal is being prepared but there is no word on when it might be revealed.
The US economic data were all of low or moderate importance. Housing starts fell 11.2% in December while building permits were up by 0.3%. Cash-Shiller's house price index went up by 4.2% in 2018. One figure that did matter was fourth quarter gross domestic product. The economy expanded at an annualised rate of 2.6%, meaning quarterly growth of 0.6%. The dollar got a boost from the numbers but it still lost a net two and a quarter cents to sterling.
The price of WTI crude is 1% higher on the week. It dropped quite sharply on Monday after the US president used Twitter to complain "Oil prices getting too high" before making back all the lost ground over the following days. The Canadian dollar is 0.6% higher on the week against the USD. It dropped quite sharply after Trump torpedoed the oil price before making back the lost ground in the days that followed. As is often the case, the Loonie was in thrall to oil prices. It lost two cents to the resurgent pound.
The Loonie was lucky not to have to rely on the Canadian economic data. Retail sales fell 0.1% in December. Inflation slowed by more than expected, to 1.4%. Factory gate prices and manufacturers' costs diverged, the former falling 0.3% in January and the latter rising 3.8%. The current account deficit widened by more than expected in the fourth quarter.
The Aussie moved higher during the first half of the week before turning lower on Wednesday. It was almost unchanged against the US dollar. The Australian dollar lost ground to the British pound, as did every other major currency. The net cost there was a loss of three and a third cents to sterling.
There were no high-profile ecostats from Australia. Construction work done in the fourth quarter of 2018 was down by a seasonally-adjusted 3.1% from Q3. Private sector credit increased 0.2% in January to a level 4.3% above the same month last year. Private capital expenditure grew 2.0$ in Q4. Arguably the most important statistic was the AiG Performance of Manufacturing Index. It was up by a point and a half in February at 52.5. The developing story from Washington, regarding trade talks with China, did not really get anywhere. It alternated almost daily between optimism and resignation.
The Kiwi began the week well. Data for the fourth quarter of 2018 showed NZ retail sales increasing by 1.7% over the three months. Excluding motor vehicles they were up by a quarterly 2.0%. Pharmaceutical and food and beverage sales hit record highs after weak performance in Q3. The story for international trade was less rosy. Exports went down in January as imports increased, creating a $914 million deficit that was more than three times as wide as expected.
ANZ's New Zealand Business Outlook ran the headline "Stalled". It noted that "business confidence fell seven points in February while firms' view of their own activity eased three points". A net 31% of respondents expected business conditions to deteriorate in the year ahead. On balance, the economic picture was not the most optimistic ever seen by the Kiwi. It still managed to pick up a third of a US cent but lost two and a quarter cents to sterling.