Sterling toughs it out


The last four days brought a little of something for everyone. Commodity prices moved higher. The US president spoke to China's leader on the phone, played golf with Japan's prime minister, lost a court case and dangled the carrot of tax cuts. North Korea test-launched a ballistic missile. Greek bailout discussions struggled.

Of those, the one that most captured financial markets' attention was Donald Trump's comment on Thursday. During a meeting with airline chiefs he said he would be making an announcement in the next couple of weeks that would be "phenomenal in terms of tax". After three weeks of Mexican walls, trade barriers and (failed) travel bans here was something that investors really did care about. It reawakened a Trumponomics-inspired enthusiasm for the dollar that had faded since the turn of the year.

That is not to say investors flocked to buy the Greenback. Over the last seven days it was actually sterling that held the lead alongside the Australian dollar. But the US currency only missed out by a dozen ticks and looked rather more investable than it had a week or two earlier.

Noises off

There was relief that Mr Trump was apparently able to avoid antagonising the leaders of China and Japan and that there was no explosive reaction to North Korea's missile test. Ahead of London's opening today the mood was positive, with oil and iron ore prices holding up and commodity-oriented currencies in demand.

Higher prices for iron ore were good for the Aussie while the Canadian dollar was helped by oil prices. The krone missed out on the oil boomlet because Friday's Norwegian CPI figures showed inflation slowing from 3.5% to 2.8%. 

Sterling was in the chasing group, unchanged on average from its Friday morning levels and flat against the US dollar and Japanese yen. It was up by a quarter of a euro cent and a fifth of a Swiss cent.

UK production buoyant

Data for UK industrial and manufacturing production were considerably more punchy than forecast. They were helpful to sterling, as was the NIESR estimate of gross domestic product in the three months to January.

Britain's manufacturing and industrial output statistics have long proved difficult for analysts to predict. Too often there are surprises in one direction or the other. This time the analysts got the direction right but were way out on the scale of the rise. Monthly increases of 2.1% and 1.1% were much bigger than the expected 0.5% and 0.2%. There was also a positive surprise from the NIESR when it put growth at 0.7% for the January quarter.

The Loonie did well on Friday after the data showed that 48k new jobs had taken Canadian unemployment down to 6.8% in January. The yen moved fractionally lower this morning because fourth quarter growth in Japan was slightly slower than expected. There are no ecostats of any consequence on today's agenda. Chinese inflation and Australian business confidence come out tonight.