And one pace forward
After unexpectedly falling on Monday the pound bounced back yesterday. As previously, there was no link between news and movement. Although the 6% monthly increase in UK mortgage approvals was theoretically positive for sterling the figure came out half an hour after the pound began its upward move.
It was a similar story with the Kiwi dollar. Following the release of the Reserve Bank of New Zealand's Financial Stability Report governor Graeme Wheeler told parliament that he expects inflation to move back within its target range in the near future, perhaps as soon as next month. His comments did help the NZ dollar ahead but most of the Kiwi's gains had come on Tuesday afternoon. It was the day's top performer, strengthening by a net third of a cent against sterling.
The pound didn't do badly though: it took silver to the Kiwi's gold with an average gain of 0.6%, almost cancelling out the previous day's -0.8% decline. Sterling added three quarters of a US cent, two thirds of a Swiss cent and a third of a euro cent. It picked up one and three quarter yen against the Japanese currency, which was the weakest performer on the day, the week and the month.
Growth and confidence
Another non-sequitur was the US growth, house price and confidence data and the performance of the dollar. Gross domestic product grew by more than expected in the third quarter and consumer confidence touched a nine-year high yet the dollar had only an average day.
On an annualised basis America's GDP expanded by 3.2% in Q3, beating forecasts of 3.0% growth. Translated into a quarter-on-quarter figure (as European data are conventionally reported) the 0.8% expansion was at the top end of expectations. The Conference Board's barometer of consumer confidence came in at 107.1 for November, six points above forecast. It was the highest reading in nine years.
Other data on Tuesday showed Sweden's economy growing by 0.5% in Q3 and German inflation slowing to 0.7% according to the EU's standardised HICP measure. The EC confidence indices were all lower than expected but investors ignored them, as usual.
Bank of England governor Mark Carney opened today's proceedings with the results of the stress tests carried out on UK commercial banks. To nobody's great surprise one bank failed the test: the news did no harm to sterling.
In fact the pound came out quite well from the governor's press conference, at which he also discussed the bank's Financial Stability Report. Over the hour it was fractionally firmer against the euro and the dollar.
There are no further economic events to threaten sterling today. Euroland reports on inflation, expected to come in at 0.6%, and Canada releases its figures for Q3 growth, which was probably a touch stronger than in the United States. Watch out for ECB president Mario Draghi, who will be speaking at lunchtime, and OPEC, which may have agreed to limit oil production.