Sterling reprieved

Euro deflated

The NHS will help design ten new housing estates focused on health and safety. There will be caution-slippery-surface signs every 10m and the shops will be prohibited from selling cola and burgers. Alcohol and nicotine will be banned. Residents might not live any longer but it will feel that way.

Some of the central banks must be having similar thoughts about the persistently-low rates of inflation they are being forced to endure.  In the European Central Bank's case, for example, it is only three years since inflation was at its 2% target level but it feels like a lifetime ago. As if to rub salt into the ECB's wounds, Euroland consumer prices were reported yesterday to have fallen by -0.2% in the year to February. Investors had been looking for something more like 0%.

The difference was enough to send the euro lower. Investors figured that even if the ECB was minded to wimp out of the easing it had promised for next week - as happened a couple of months back - it would be impossible to do so in the face of deflation. Softer German retail sales and import prices had already been leading the euro lower when the deflation data appeared. It ended up with Monday's wooden spoon, losing a cent and a quarter to sterling and half a US cent.

Random moves

Investors were cheered by news that the People's Bank of China was reducing the reserve requirement for banks. The aim of the move is to stimulate lending and, thereby, the economy. It was good for commodity and equity prices but had no coherent effect on currencies.

Give or take a handful of ticks the US dollar, the Swiss franc, the Australian dollar and the northern Scandinavian crowns were unchanged on the day against one another. It is relatively unusual to see the franc, the yen and the Aussie heading in the same direction at the same pace. Even more unusual was the way sterling made ground against all but the rand. It strengthened by an average of 0.4% against the other dozen most actively-traded currencies. 

Other than Euroland deflation there was little to interest investors among Monday's ecostats. UK mortgage approvals and consumer credit contributed to sterling's gains, both coming in close to eight-year highs.

PMI day

It being the first of the month, purchasing managers' indices will be taking the pulse of manufacturers around the world. The readings already released, from Australia, China and Japan, carried mixed signals.

Australia's 53.5 was the strongest since August 2010 while China's official figure was the softest since August 2012. Both of the Chinese manufacturing PMIs fell further into the contraction zone, one to 49.0 and the other to 48.0. Japan was on the cusp at 50.1.

Of the PMIs yet to come, Switzerland and the United States are pencilled in for sub-50 readings and Canada could be down there with them. The target for the UK figure is 52.2.