Budget statements

Close to a deal

A paper by Commerzbank'c chief economist Jorg Kramer argues that "the threshold for a shock triggered by the prospect of uncertainty is very high". Dr Kramer cites the Brexit situation as one that has had had little effect on foreign investment or growth. And it didn't hold sterling back yesterday.

The pound and the Swiss franc were Monday's joint top performers, strengthening by an average of 0.2% against the other dozen most actively-traded currencies. Sterling added a fifth of a euro cent and a third of a US cent.

It was held back initially by a report from Visa that spending on its credit cards fell 1.1% in February and that the first quarter of 2018 could be the "worst on record". However, the pound recovered briskly after one of David Davis's lieutenants spoke optimistically about a Brexit transition arrangement with the EU. Robin Walker told the Institute of Directors "I want to stress that we are very close to a deal". 

Talking trade

The storm around Donald Trump's import tariffs, and the possible reaction of the EU, has abated somewhat as folk on this side of the pond realise that his argument is not without merit. EU taxes on US vehicle imports are already higher than US taxes on European kit.

Harley Davidson motorcycles imported to the EU attract an import tax of 6%; American cars are taxed at 10%. Imports of similar vehicles to the US are taxed at 2.5%. The difference is not huge but is already in Europe's "favour", making it a little tricky for Brussels to claim the high ground.

That realisation, and the US administration's apparent willingness to exclude its close allies from the taxes on steel and aluminium, has left investors considerably less nervous that a proper trade war is brewing. Xi Jinping, the Chinese emperor, might have different ideas on the subject but for now he is keeping his own counsel. The consequent risk-on attitude among investors has been helpful to commodity-exporters' currencies and detrimental to the safe havens. In the last seven days the Aussie has strengthened by 2% against the yen.

Spring in his step

The chancellor of the exchequer will present his budget statement at about half past twelve. It will not include any changes to taxation but it will bring an update of the Office for Budget Responsibility's growth forecasts.

It will also, inevitably, highlight the government's recent claim to have brought the budget into balance. That, together with a presumed upward revision to future economic prospects, makes investors optimistic that that Mr Hammond's appearance will be positive for the pound.

On the statistical front there is not much to shoot at. The most important numbers come at the same time as the chancellor's speech, in the shape of the US consumer price index readings. Headline inflation is pencilled in at 2.2%, a tick higher on the month. Bank of Canada governor Stephen Poloz will be speaking this afternoon.