Sterling fights back

Rally relief

Sterling ended the week looking rather less fragile than it had begun it. A combination of lower UK government borrowing and a hawkishly-inclined Bank of England chief economist set the scene on Wednesday for an upward drift into the weekend. The pound was still looking perky in the Far East this morning.

The CBI's Industrial Trends Survey contributed to the more positive tone when it came in stronger than expected, up by seven points at 16. There were no UK economic statistics on Friday but the US Commodity Futures Trading Commission reported a fall in the number of short-sterling positions. The implication is that speculators are a little less bearish about sterling.

Overall the pound is on average unchanged on the week against the other dozen most actively-traded currencies. It is up by a quarter of a cent each against the euro and the US dollar. Considering the bind it was in on Wednesday morning that is no mean achievement.

Loonie adventures

Twice last week the Canadian dollar was the daily champion among the major currencies and twice it came last. On Thursday it won and on Friday it lost, both times because of the same logic.

More than a week ago the Bank of Canada changed the tone of its guidance, leading investors to believe that higher interest rates could at last be on the cards. Thursday's Canadian retail sales figures came in above forecast, rising by 0.8% in April. The numbers appeared to support the idea of tighter monetary policy and the Loonie went up by a cent.

Friday's consumer price index data came in below forecast, knocking the headline rate of inflation back from 1.6% to 1.3%.  The numbers appeared not to support the idea of tighter monetary policy so the Loonie went down by a cent. On the week it is unchanged against the pound.

Durable goods

A paucity of ecostats today means that the full focus of investors will be on German business confidence this morning, US durable goods orders after lunch and New Zealand's balance of trade tonight. It is not a lot to play with so they will just have to do their best.

Investors struggled to find inspiration among Friday's raft of preliminary purchasing managers' index readings. More of the numbers fell short of expectations than beat them and the pain in Euroland was no greater than that felt across the Atlantic.

Analysts are not sticking their necks out with the IFO measures of German business confidence. The consensus is as close to unchanged as makes no difference. They can't help putting their heads on the block when it comes to US durable goods orders, which are notoriously difficult to predict. The best guess is that orders were down by about -0.5% in May and up by 0.3% once the effect of big-ticket transportation items (such as aircraft fleets) is stripped out. New Zealand's trade surplus is expected to have shrunk slightly in May.