Sterling still looks alright

No warning

When a journalist asked Mark Carney on Thursday whether Britain's departure from the EU could lead to a "technical" recession the Bank of England governor had four options. He could have said no, yes, don't know or no comment. He said yes, and the pound went up. How so?

Investors' logic led them to the conclusion that Dr Carney's "warning" (it wasn't actually a warning at all, just an answer to a question) would be grist to the Remainers' mill, improving the likelihood that Britain would stay in the European Union. Sterling's only loss on the day was to the Norwegian krone, which gained ground after Norway's central bank left its benchmark interest rate unchanged at 0.5%. A cut had been suspected.

Sterling was also unaffected by the Bank's mark-down of its forecast for UK economic growth in the quarterly Inflation Report. Just about everyone had expected the adjustment so it came as no surprise. And it helped sterling's case that the vote to keep the Bank Rate at 0.5% was again unanimous. Recent talk of a possible cut had raised concern that somebody on the Monetary Policy Committee might actually vote for one. They didn't.

Retail sales boost dollar

Friday's currency star was the US dollar. It started the day well, helped by news that German consumer prices fell by -0.4% in April, and ended it better as a result of stronger-than-expected US retail sales and consumer confidence data.

The US dollar strengthened against sterling by more than a cent on Friday, with roughly half the gain coming with those German inflation data as London opened. It picked up the balance after lunch, when US retail sales were reported to have risen by 1.3% in the month of April. The retail sales figure was well ahead of the forecast 0.8% increase, as was the University of Michigan's consumer sentiment index. It came in at a provisional 95.8, seven points higher on the month.

The back marker this morning is the South African rand. It opened lower after a report in the Sunday Times that Pravin Gordhan, the country's finance minister, was about to be arrested for dodgy dealings when he was head of the South African Revenue Service. Everyone, from President Zuma down, denied the story but it still hurt the rand, which is down by -1.6% on the day.

Missed it

The highlight of today's agenda took place on Saturday, when Chinese data for lending, retail sales, industrial production and urban investment all came in below forecast. The figures had little impact on exchange rates.

With half of Europe on holiday for Whit Monday the only ecostats from this side of the Atlantic are for Portuguese gross domestic product in Q1. After lunch the United States reports on house-building, New York manufacturing activity and international capital flows.

That leaves the Bank of Canada's quarterly economic review as the only item of any note. It probably won't affect the Loonie.