Counting doves


Just as Friday's report of a 0.1% monthly increase in industrial output did nothing to help the USD, damning it with faint praise, yesterday's 0.1% increase in factory orders was similarly unhelpful. The only other US ecostat, the Redbook Index which monitors retail sales, was at least decently positive - up by an annual 4.9% - but it is not a statistic that carries much weight with investors.

It was fairly quiet on the trade war front. US officials intend to visit Beijing next week for talks and the president says the negotiations are going "very well". However, Bloomberg reported earlier today that China is "pushing back" to ensure that a trade deal and an end to sanctions go hand-in-hand. The USD is once again roughly unchanged on the day.


The euro is again flat on the day against the USD. Compared with a week ago it is 0.5% firmer but those gains have been slow to accrue. They have only recently made up for the EUR's downward lurch three weeks ago when the European Central Bank marked down its economic forecasts and pushed out the likely date of an interest rate hike. Right now it is the Fed that investors see as the dovish one, and they are looking for a lower dot-plot today when the Federal Open Market Committee reveals its decision.

Euroland was not to be seen in the ecostat arena this morning, save for a 0.1% monthly decline in German producer prices. The ECB will hold a meeting of the Governing Council but it does not relate to monetary policy.


The Loonie enjoyed a half-cent upward spike on Tuesday morning but it did not take long for the correction to begin. By the end of the day it was back in line with the USD and the two are virtually unchanged on the day against one another.

The government's budget had an expansionary tilt, intended to boost consumer spending as the economy slows. However, critics believe the measures are too thinly-spread to have any market effect before the election in October.


It is arguable that the UK inflation data are largely irrelevant to Bank of England monetary policy. The lumbering Brexit juggernaut makes it nigh-on impossible for the bank to shift interest rates except in the case of clear and present danger. Sure enough, an unexpected uptick in the headline rate of inflation to 1.9% had only a modestly positive effect on the GBP. Sterling is down by 0.4% against the USD, principally as a result of… Brexit.

The story this time relates to the prime minister asking the EU for a postponement of the March 29 departure day. She is said to be requesting a three-month extension. The more they think about it, the more investors think it is a bad idea to go for such a short period. Investors fear that Theresa May will cling stubbornly to her mantra of "my way or no way", deliberately risking a no-deal Brexit despite parliament's rejection of such an outcome. 


The USD won a little back from the yen on Tuesday, with the JPY 0.2% lower on the day. Current economic data had nothing to do with it. 

Investors did notice, however, that the Japanese government downgraded its assessment of the economy for the first time in three years. The March report from the cabinet office noted that "the economy is in gradual recovery, but exports and output are showing signs of weakness". It chimes with Monday's trade figures, which showed imports falling by an annual 6.7% while imports were down by 1.2%.  

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