Sterling woes continue – 4th April 2016
If you read the papers this morning you will have seen the revelation that the tax haven, Panama, is being used as a tax haven by the rich and powerful. It is a story that could potentially have have repercussions for those involved and damage reputations. Sterling’s reputation however, is sliding lower once again as it was Friday’s worst-performing major currency by quite a margin.
Thursday’s UK data had shown greater-than-expected economic expansion in the fourth quarter of 2015, 0.6% instead of 0.5%, and strong mortgage approvals. On Friday morning Nationwide’s index put house prices 5.7% higher on the year and the manufacturing sector purchasing managers’ index came in 51.0, shy of the predicted 51.2 but two ticks better on the month. There was nothing among those figures to provoke a Sterling sell-off.
So it must have been sentiment that sent it lower, because Sterling lost an average of 0.8% on Friday – one Euro cent – to the other dozen most actively-traded currencies. The Brexit threat continues to loom over Sterling. On the week and the month it has fallen by an average of 1.4% and 2.6% with its only gains being against the US Dollar.
Friday’s US ecostats were helpful to the US Dollar but, except against Sterling, their effect was fairly short-lived. Good as they were, they were not enough to make any real difference to the perception that the Federal Reserve is nervous about spoiling the economic picture with a too-hasty rate increase. Non-farm payrolls beat forecast by 10,000, increasing by 215,000 in March, and average hourly earnings increased by a worthwhile 0.3%. The two manufacturing PMIs either met or exceeded forecast and consumer confidence looked okay at 91.0.
In 90 minutes the US Dollar strengthened by a cent against the Euro, only to give back more than half of that gain before the end of the day. Although market expectations for Fed policy vary almost by the week, Friday’s data failed to make a case for higher rates in the near future.
The Australian Dollar has had a poor start to the week because of disappointing Australian retail sales, which were flat in February and cost the Aussie Dollar a cent this morning against Sterling.
Other data today covers Euroland unemployment and investor confidence, Britain’s construction sector PMI and US factory orders. The Bank of Canada governor will be speaking this afternoon. Watch out too for the thorny matter of Greek debt, which threatens to raise its ugly head again as bailout talks recommence.