It's all about central banks

Sterling unmoved by budget

Investors seemed to be generally relaxed about Philip Hammond's spring budget tinkering. Big changes were neither expected nor delivered: any he might have in mind are presumably being saved for what will in future be the main event - the autumn budget. 

The pound is on average 0.4% firmer on the day against the other dozen most actively-traded currencies but it is far from clear that its gains had anything to do with the chancellor. It did move higher during his speech but that could have been simply a correction to the selling that had gone on earlier. Against the Aussie, for example, the pound was trading three hours after the speech at the same level it had been three hours prior to it.

Nevertheless sterling did strengthen by a net one and a quarter Australian cents on the day It added almost that much against the NZ dollar and picked up a proportionally smaller half a Canadian cent. The pound covered a half-cent range against the euro four times. In the end it was a two-all draw with the pair unchanged on the day.


The US dollar was the day's overall leader, eventually rising by half a cent against sterling and by a third of a cent against the euro. ADP's employment change figure for February was stronger than expected at 298k: it didn't cause the dollar's rise but it did assist it. 

ADP is an American firm that provides HR and payroll services that cover nearly 24 million workers in the private sector. The monthly change in that number is the basis of ADP's "employment change" figure and it has proved to be a good indicator of the change in US nonfarm payrolls. Yesterday's 298k increase was substantially bigger than expected, leading investors to wonder if tomorrow's official figure - pencilled in at 195k - will also beat forecast.

Even though a rate hike by the Fed next Wednesday is fully priced into the dollar investors will continue to be heartened by strong economic data that help to keep the Fed on a tightening track. 


At half past one today Mario Draghi will explain to the world why the European Central Bank's Governing Council is sticking with a negative deposit rate and quantitative easing despite inflation having returned to it 2% target. Or might he surprise investors?

There is almost unanimous belief among analysts that the ECB will make no change to monetary policy today. Nevertheless there will be some investors out there who think Sig. Draghi could set the scene for a higher deposit rate or a winding down of the bank's asset purchase programme. If he fails to do so it could put downward pressure on the euro.

Beyond the Chinese inflation data that came out earlier there are no ecostats of distinction on today's list. Friday will be a different matter, with US nonfarm payrolls and UK production and trade figures.