There was a gung-ho mood in New York that took the S&P500 to a record closing high of 2933.68. The enthusiasm affected the USD, which came within a fifth of a cent of its early-March 21-month high against the EUR.
Although the US economic data were mostly positive for the dollar, it is not clear that they played a major part in its success. Redbook retail sales were 1.2% higher on the month and up by 6% from a year ago. The Richmond Fed's manufacturing index softened by seven points to 3, "weighed down by slightly negative readings in the indexes for both shipments and new orders but buoyed by a positive reading for the third component index, employment". "Firms were optimistic, expecting conditions to improve in the next six months." After disappointing numbers for housing starts, building permits and existing home sales in recent days the 4.5% monthly jump in new home sales was a welcome boost, especially as they had been forecast to fall 2.5% in March.
The euro had already lost ground to the USD by the time the US new home sales data came out. They coincided with the publication of the European Commission's consumer confidence indication, which also had minimal impact on the exchange rate. Rather than improving slightly to -7.0, as forecast, the index fell to -7.9. The EC was keen to point out that the index remains "well above [its] long-term average of -11.3".
This morning's IFO measures of business confidence were even less helpful to the EUR. All three - expectations, current assessment and business climate - were lower on the month and below forecast. The IFO opened its commentary with an observation that "the mood among German managers became slightly gloomier this month". The euro was certainly slightly gloomier this morning, down by 0.3% from Tuesday's opening.
The Loonie has not been able to get a break in recent days. Although the US administration is taking a tougher line on Iran sanctions, such that WTI crude is 3.4% above its position on Thursday morning, the CAD has been unable to catch the wave. On occasions it has moved in the same general direction as oil prices but the divergences have been costly. It is 0.6% lower on the day against the USD. Even an unexpectedly strong 0.3% monthly increase in wholesale sales was not enough to help it higher.
It could be that investors are nervous about what the Bank of Canada will say today. In its last policy statement six weeks ago the BoC talked of "increased uncertainty about the timing of future rate increases". There is every chance that today's statement will no longer mention the possibility of an increase. America's Federal Reserve is being "patient" and the BoC is likely to follow suit.
The case for sterling was not helped by data this morning which showed more government borrowing than expected in the latest full financial year (April 2018 to March 2019). Although borrowing was 41% lower than in the previous financial year, the sole UK ecostat on today's agenda failed to hit the mark.
That was not sterling's main problem though. On Tuesday morning investors picked up on stories that the cross-party Brexit talks in Westminster were not making progress and that efforts were intensifying in the Conservative party to force prime minister Theresa May from office. The news can hardly have come as a surprise but investors were dispirited that the bane of Brexit had returned to rule their lives. The GBP is 0.4% lower on the day.
The JPY and USD are unchanged against one another on the week as well as on the day. The yen seems not so much to be following the dollar as to be gripped with inertia. It is just not going anywhere.
Overnight data from Japan were sufficiently in line with forecast to avoid rattling the JPY's cage. The all industry activity index was a touch lower than expected at -0.2% and the leading economic index also missed the mark at 97.1 while the coincident index improved unexpectedly to 100.4.