Sterling halts it’s slide – 25th February 2016

Sterling halts it’s slide

A glance at the exchange rates this morning reveals something we have not been used to recently; Sterling not falling across the board. It even gained against the Japanese Yen, the Norwegian Krone and the South African Rand yesterday. It is the Rand that has taken Sterling’s place as the biggest loser, falling by 50 cents for a daily loss of 2.2% after finance minister Pravin Gordhan presented his budget which the markets viewed as optimistic and potentially undeliverable.

At the head of the field the Canadian and New Zealand Dollars vied for supremacy, strengthening by 0.9% and 1.0% respectively against Sterling. The Aussie Dollar isn’t far behind however the Aussie suffered a little when investors were disappointed by the Australian private sector investment data.

Overall though Sterling, was a net loser for a fourth successive day but the damage was slight, with an average decline of just -0.1%. The Bank of England’s Jon Cunliffe echoed comments made by his boss earlier in the week and the two minor-league UK ecostats were there or thereabouts. Mortgage approvals by the British Bankers’ Association members in January numbered 47,509, not far short of the 50,000 post-recession high for the same month two years ago. The Confederation of British Industry’s Distributive Trades survey posted a reading of 10 for February, a couple of points below forecast but still in the expansion zone.

Deputy Director Cunliffe supported the Governor’s view that, if the MPC should need to react to deteriorating economic conditions, “we have a range of tools at our disposal and should be ready to use them whichever risk materializes”. It was not controversial stuff, especially given the Governor’s rejection of negative interest rates as one of those tools.

The first revision to UK fourth quarter gross domestic product appears this morning, together with the figures for business investment. It will be followed by the finalised Euroland inflation data and, this afternoon, by US durable goods orders. Of the three, Eurozone inflation will be of least importance unless it surprises mightily on the upside. The European Central Bank is widely expected to relax monetary policy further next month whatever today’s inflation rate. Of greatest interest to the wider world, will be US durable goods orders as they are held to be an important barometer of US activity. Unfortunately they are nigh-on impossible for analysts to predict.

A month ago the first estimate of Britain’s GDP showed quarterly growth of 0.5%. Today’s revision is not expected to alter that number. But the investment data often disappoint.