Growth and investment

Evidence needed by FOMC

Wednesday's trio of joint losers included the Japanese yen for a second day. This time its partners in gloom were the US dollar and the British pound. With only a dozen or so ticks to separate them all three were down by an average of -0.6% against the other ten most actively-traded currencies.

The minutes of this month's Federal Open Market Committee showed that members thought "it would be prudent to await additional evidence indicating that the recent slowing in the pace of economic activity had been transitory" before taking interest rates any higher. Investors took this to mean that although a June rate hike remains on the cards (78% chance according to futures pricing) a further move this year is less certain (37% chance). The dollar is down by half a cent from its position prior to the minutes' release.

With the yen, yesterday's losses were more the result of omission than commission. For a week now it has been drifting gently lower against the US dollar and would have continued in that direction had it not been for the FOMC's supposedly more dovish minutes.

Don't be impatient

The bosses of the European Central Bank and the Bank of Canada both, in their different ways, urged investors to be patient. Mario Draghi implied there will be no tilt towards tightening when the Governing Council meets next month. BoC Govenor Stephen Poloz came close to admitting such a tilt.

The BoC statement was apparently one of the shortest ever released. Investors took it positively and sent the Loonie into second place for the day with a gain of 1% against the pound and the Greenback. The ECB president's theoretically-negative comments had little impact on the euro, which strengthened by half a cent.

Out at the front of the field for a second day the South African rand added 1.6%, once again on the back of the unconfirmed story that President Zuma faces being unseated by his party. Its gains over the two days now amount to 2.7%.

GDPx2, SARB and G7

The key ecostats over the next two days are the revised first quarter gross domestic product figures from Britain and the United States. The key events will be the South African Reserve Bank's rate announcement and Donald Trump's first G7 meeting, in Sicily.

Today's GDP data are expected to confirm quarterly growth of just 0.3% in Britain in Q1. The business investment component will be important, especially if it continued to decline. Tomorrow's US figure is pencilled in at an even more pathetic 0.2% (0.9% annualised) but there is a history of upwards revisions to the American Q1 numbers. US durable goods orders also come out on Friday.

Analysts do not expect any change to the SARB's benchmark 7% interest rate even though inflation is now down to 5.3%. As for the G7 meeting, the attendance of Mr Trump has put paid to any chance of the usual pre-written communiqué. Anything could happen.