Snoozeday

Ahead of London’s opening, six major currencies were exactly unchanged against one another from Friday morning. These same six pairs are also unchanged as compared with a week ago. It suggests there is not a vast appetite among investors for FX action, and that the week ahead could be a quiet one.

Friday’s sedentary sextet comprised the GBP, USD, JPY, CAD, NZD and SEK: the CHF in the lead was 0.2% - a fifth of a cent – higher while the AUD and NOK were 0.3% behind – half an Australian cent. The currencies unchanged on the week against one another were the GBP, USD, CHF and SEK. On the fringes, the CAD led by 0.5% over the seven days and the AUD was 0.5% behind; just under a cent in both cases.

There was nothing among Friday’s economic data to energise investors. The round of provisional purchasing managers’ index readings included no horrors. Except from Australia, every reading was well above the breakeven line at 50. However, more than a couple of them came in lower on the month or below forecast.

Hits and misses

The sparkle, or otherwise, of Friday’s ecostats had a lot to do with domestic Covid pressures and restrictions. Notably, the PMIs from Australia showed how the “private sector sinks into contraction as new virus wave hits”. Conversely, in Europe, the “Eurozone flash PMI hits 21-year high as economy reopens”.

Investors took the discrepancy pretty much in their stride. Although they sent the Aussie 0.4% lower against the euro it hardly counted as cruel or unusual punishment. The provisional PMIs from Britain all delivered four-month lows, “as shortages of staff and materials hinder recovery in July”. Even so, the manufacturing and services components were still among the highest in five years. The US readings showed a “Robust upturn in private sector activity amid quicker manufacturing output expansion”.

Friday’s false dichotomy was the gap between UK and Canadian retail sales. UK sales were 0.5% higher on the month while Canadian sales were down by 2.1%. However, the UK increase was in June and the Canadian decline was for May. UK sales had also fallen in May, albeit only by 1.3%.

What we have learned in the past six years

New Zealand kicked off the week with a modest trade surplus for June and Japan followed on with a contractionary 47.7 for the composite PMI. Over the 12-month period, NZ imports rose 24% while exports went up by only 17%. Japan’s PMI was characterised as private sector output falling “at a sharper pace”.

Ecostats today will be few and far between. This morning, IFO presents its measures of German business confidence. After lunch, the US Census Board reports on new home sales in June and the Dallas Fed prints its manufacturing business index for July. No data of any consequence are due overnight.

The only item on the agenda with any (faint) chance of influencing sterling is a speech at midday by Gertjan Vlieghe, an external member of the Bank of England’s Monetary Policy Committee. The title of his presentation is not the punchiest ever: “What we have learned in the past six years about ‘3D’ (demographics, Debt, distribution of income) drivers of low r". As Mr Vlieghe is an economist, it is likely that the “r” in question is the required rate of return, as opposed to the Covid rate of infection, but you never know…