Sterling takes a breather

The first shall be last

Forget the Fitbit: the latest must-have wristwear is the Pavlok. Connected to users' bank accounts, it gives them an electric shock if they spend too much. Whilst there is no evidence of the device having become popular among investors, something shocked them out of buying sterling on Friday.

One motive for the selling was undoubtedly profit-taking. Since the previous Monday the pound had strengthened by an average of 3.3% against the other dozen most actively-traded currencies, its smallest rise being the cent and a half it took from the US dollar. With the weekend approaching - and with it the possibility of less helpful opinion polls - Friday was a good day to bank some gains.

The move was triggered by reports of a speech given the previous day by Gertjan Vlieghe, a member of the Bank of England's Monetary Policy Committee. Because it was a dry technical sermon to the London Business School there was no reaction at the time. But when bored journalists spent the night poring over the text they eventually found a bit that said "additional monetary stimulus" (AKA rate cuts) might be necessary even if Britain votes to stay in the EU. 

And the last first

As the British pound fell to the back of the field the South African rand shot into first place with a gain of 1.7%. That move, too, had something to do with profit-taking. Investors cut their short positions when it became clear that the finance minister was not about to be shot.

Pravin Gordhan is not out of the woods yet though: the head of the wonderfully-named Hawks police unit said at the weekend "at this stage there should be no reason for the minister to be concerned". 

The only economic data of any note on Friday were the Canadian consumer price index and retail sales numbers. Inflation was alright, with the headline figure on target at 1.7% and the core measure higher than expected at 2.2%. Retail sales weren't, with a bigger-than-expected fall of -1.0% in March. There was a frisson of excitement at the time but the Loonie did not go anywhere.

More from the Fed

It is a dull old agenda today, with a handful of preliminary purchasing managers' index readings and not much else. The wild card could be a formal announcement by Germany's Bayer of the terms of its bid for America's Monsanto.

The story is that Bayer will pay US$46bn "cash" for Monsanto, with the implication that there will have to be a sizeable FX transaction to turn euros into dollars. That is unlikely to be the case: Bayer's treasurer is hardly going to call his bank for a price in 46 yards. But the deal could weigh on the euro until the details become clearer.

Four central banker speeches are coming up: three from the Federal Reserve and one from the Reserve Bank of Australia. All will be closely scrutinised.