Sterling snoozes and loses


The dollar did not put much effort into it on Tuesday. It trod water in the middle of quite a tightly-packed group, bookended by a fading NZD (-0.4%) and a flying AUD (+0.6%).

A short handful of US economic data offered minimal inspiration to potential buyers. Redbook's index put retail sales 5.0% above the same period a year ago and 0.7% higher on the month. Capacity utilization was fractionally lower in March and industrial production was down by 0.1%. The NAHB Housing Market Index ticked up from 62 to 63, as expected. It has barely moved in the last three months.


The story from Euroland this morning was all about inflation. Italy and pan-Euroland delivered data that were all at or very close to the forecast levels. The EUR is 0.1% firmer on the day and was not influenced by the inflation  figures.

Consumer prices in Italy increased by 1.0% in the year to March, leaving the rate of inflation unchanged. In Euroland as a whole it was also unchanged, at 1.4%. The euro zone's seasonally-adjusted trade figures showed an increased surplus of €19.5 billion in February.


The Loonie did a rather better job of tracking oil prices on Tuesday. WTI crude went up by 2% and the CAD strengthened by 0.5% against the USD.

That was quite an achievement, given the unhelpful Canadian economic data. Manufacturing shipments, which were supposed to have been flat in February, were 0.2% lower on the month and January's 1.0% increase was revised down to 0.8%. International investment flows saw foreigners buying a net $12 billion of Canadian securities while Canadians bought a net $5.3bn of foreign investments, notably US corporate bonds.


With no new Brexit developments and a long weekend looming, the GBP took it easy - perhaps too easy. It is 0.4% lower on the day against the USD.

UK inflation data this morning, which might have helped it, failed to do so because most of the measures came in below forecast and lower on the month. The headline rate of CPI inflation ticked down to 1.9%, having been forest to rise to 2%. The old-fashioned retail price index, upon which many wage negotiations still depend, was down from 2.5% to 2.4%. Producer price index readings showed manufacturers' costs falling 0.2% in March while factory gate prices increased by 0.3%.


There was a brief downward spike for the JPY when the Japanese trade figures came out. It was quickly corrected and the yen is just 0.1% lower on the day against the USD.

It is understandable that investors reacted badly to the numbers. Imports in March were 1.1% more than the same month last year while exports were down 2.4%. The shortfall contributed to the first trade deficit in three fiscal years.

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