Two belts one road
Sterling took a belt from the UK manufacturing and industrial production data on Thursday. It took another from the Bank of England a couple of hours later. There was only one road it could take: the road south.
Investors should by now have transcended the emotion of disappointment at negative UK output data. In six of the last eight months industrial production has suffered a monthly fall so Thursday's figures really ought not to have come as a shock. Even so, disappointment was what investors felt when industrial production was reported to have fallen by -0.5% in March and the narrower manufacturing production was down by -0.6%.
There was further disappointment at lunchtime when the Bank of England published the minutes of the Monetary Policy Committee meeting and the quarterly Inflation Report. The minutes revealed that the only MPC member to vote for a rate increase was Kristin Forbes. As Ms Forbes has been the sole hawkish voice in recent months and she will be leaving the committee at the end of next month investors were left to assume that no rate increase will be forthcoming in the foreseeable future. The pound is down by an average of -0.9% from its position on Thursday morning.
The US dollar was caught out a day later when weak figures for April retail sales in the States coincided with a slowdown in inflation from 2.4% to 2.2%. It was Friday's weakest performer, though only by the narrow margin of a fifth of a cent against sterling.
With Easter falling in March 2016 and in April this year the data on Friday should have been appreciably stronger than the numbers released a month ago for March. They were not. Even though the March figures were upwardly revised, investors were unimpressed to see sales increasing by only 0.4% instead of the expected 0.6%.
Likewise with inflation, the slowdown in both headline and core inflation came as a surprise. With prices rising more slowly and consumers apparently not pulling their weight investors were left to question the continued commitment of the Federal Reserve to raising interest rates. They marked the dollar down by half a cent on the news. Since Thursday morning it has strengthened only against the pound, and even there by only a quarter of a cent.
There is nothing among today's ecostats to do any damage to anything. Even some potentially important data released earlier this morning had negligible effect on exchange rates.
Strong first quarter retail sales in New Zealand were positive for the Kiwi but left it unchanged from Friday afternoon's levels. Chinese data for retail sales (up by an annual 10.7% in April), industrial production (+6.5%) and urban investment (+8.9%) were underwhelming.
There are figures this morning for Italian inflation and first quarter growth in Greece and Portugal. After lunch come the US NAHB housing market index and the NY Fed's manufacturing index.