Pound splutters

Shooting for the stars
Plans are afoot to launch a tiny laser-powered spacecraft and send it to Alpha Centauri, 4.37 light years from Earth. By the time it reaches its destination in 2039, analysts believe the headline rate of UK inflation may have risen to almost 2%. 

The consumer price index took a step in that direction in March, with prices rising by a monthly 0.4%. It took the annual rate of inflation to 0.5%, a tick higher than investors had been expecting. They felt obliged to buy sterling on the news, because that's what they are supposed to do when inflation exceeds forecast. But over the next couple of hours they had a rethink. They came to the conclusion that the difference between 0.4% and 0.5% was not enough to precipitate a rate increase by the Bank of England. So they offloaded their impulse purchases and the pound dropped back.

It left sterling with net gains on the day of half a Swiss cent and two thirds of a euro cent. The pound was just about unchanged against the US dollar. Its best result was a gain of more than one yen as the Japanese currency suffered a third day of profit-taking sales.

Shooting for the moon
Tuesday's top performers were the commodity dollars. Helped along by a jump in the price of oil the Canadian dollar led the way, strengthening by 0.9%, while the antipodeans were hard on its heels with gains of 0.7% each.

The oil story centred on a report by Russian news agency Interfax that the coming weekend's OPEC meeting will result in an agreement to cut production. The news sent oil 4% higher. Canada's dollar was the biggest beneficiary and the Aussie and Kiwi were carried along in its wake. The Norwegian krone only managed to add 0.2% and the South African rand felt no benefit at all.

Data from the States showed import prices falling by -6.2% in the year to March while export prices were down by -6.1%. The two cancelled each other out and had no impact on the dollar. 

Chinese trade
Today's agenda began with a -4% decline in Australian consumer confidence, which had no effect on the Australian dollar, and were followed by China's balance of trade data, which did. Imports fell by less than expected and exports rose by an annual 11.5%, adding to the spring in the Aussie's step.

Inflation figures ahead of London's opening showed France's CPI falling by an annual -0.1% while Spanish prices were down by -0.8%. The only other European figures this morning are for pan-Euroland industrial production, which carries little weight because the German and French components are already known.

The most important data after lunch will be US retail sales for March. A 0.1% monthly increase is expected after a -0.1% decline in February. Strong numbers would be positive for the US dollar. The Bank of Canada is expected to keep its benchmark rate at 0.5%.