Dawn of an era

Hardly a ripple

There was surprisingly little reaction to the prime minister's Dear John letter to the European Commission. Donald Tusk was evidently unhappy but investors refused to get emotionally involved, to the extent that sterling was only a third of cent behind Wednesday's leader, the Canadian dollar.

To be fair, the market has had many months to prepare itself for the onset of Britain's divorce proceedings with the EU. Investors spent much of that time marking down the pound, which has fallen by an average of -14% since the day of the referendum. Perhaps, having got their retaliation in early, investors were not inclined to make a big deal of what, after all, was more of an administrative procedure than an earth-shaking event.

In keeping with the market's apparent indifference to the Article 50 letter Wednesday was also a good day for oil and commodity prices and for the commodity dollars. Risk-on sentiment saw the Aussie and the Kiwi sharing second place with the pound while the safe-haven yen was down by -0.3% and the euro and the Swiss franc lost nearly a cent each.

Confidence all round

The confident mood of investors mirrored that of consumers and businesses. Measures from Switzerland, France and Italy came in mostly better than expected and above forecast.  The odd one out was Sweden's consumer confidence figure. It came in a couple of points lower on the month.

At 102.6 Swedish consumer confidence was only three points adrift from the multi-year high it touched at the end of last year. Even so, the discrepancy was enough to send the krona lower. It was the weakest among the major currencies, falling by -0.8% on the day.

Meanwhile business confidence in Italy and Switzerland improved, as did Italian consumer confidence. French consumers registered no change in either direction. UK mortgage approvals were down by -1.1% in February and US pending home sales increased by 5.5%. Neither figure excited investors.


Several high-value economic statistics are scheduled for release today and tomorrow, including the second revision to fourth quarter gross domestic product growth in the States and Britain. Three-month-old ecostats ought not to have an appreciable effect on exchange rates today but they can sometimes do exactly that.

Investors will be looking for confirmation that Britain's economy expanded by a quarterly 0.7% in Q4 and that America's grew by 0.5%. Other data due out before the weekend include Euroland and UK consumer confidence, German and Japanese inflation, Australian business confidence, euro zone inflation and US consumer confidence. With UK inflation now outpacing wage increases that UK figure will merit a close look.

At lunchtime today the South African Reserve Bank is expected to keep its benchmark "Repo" interest rate steady at 7%. There is the outside chance of a cut. Of greater interest to investors, though, will be the updates on the status of finance minister Pravin Gordhan. The rand's performance will depend on whether he stays or goes.