Sterling lost three quarters of a US cent and a third of a Swiss cent on Monday but elsewhere the pound was higher, with a daily average gain of 0.3%.

1. Weekly Currency Round-up – 27th April 2018
Sterling lost three quarters of a US cent and a third of a Swiss cent on Monday but elsewhere the pound was
higher, with a daily average gain of 0.3%. The positive growth continued into Tuesday when it topped the
major currency rankings for the first time in more than a week. The pound's gains averaged 0.4%; it took a
quarter of a cent each off the euro and the US dollar. The reasons for this aren’t clear, but on the borrowing
front, the government made a net repayment of £300m in March. For the financial year 2017-18 as a whole
public sector borrowing amounted to £42.6bn, nearly three billion less than the chancellor predicted in last
month's Spring Statement.
The CBI survey found industrial orders and selling prices in April behaving similarly to the previous month
while optimism faded from 13 to -4. The CBI's Distributive Trades Survey a balance of -2 per cent, compared
to expectations of 16 per cent growth. High street sales were flat in the year to April, and while 31% of retailers
said sales were up in April, 33% said they declined. April also saw consumer confidence fall from a 10-month
high according to the Gfk index. The main index fell back to -9 in the month, down from -7 in March and
there was also a fall in the measure of the public’s expectations for their personal financial situation over the
next 12 months, which fell from 10 to 4, suggesting people are feeling less confident, despite the decline in
inflation and wages that the Bank of England expects to underpin spending.
On Thursday, Mario Draghi released the April statement from the ECB and it was more of the same, which
didn’t help the euro. The ECB's official monetary policy statement and actual policy settings remained
unchanged, while ECB President Mario Draghi shrugged-off growth momentum fears but ultimately gave
traders little reason to bid the Euro higher. Any loss of growth momentum in the Eurozone at the start of 2018
was observed as a temporary phenomenon due to "bad weather, strikes and the timing of Easter," and the
focus was on the broader themes of regional growth and convergence with more normal levels of inflation in
the medium-term - at or just below the ECB's target of 2.0%.
The US dollar, finished last week as the top performer and this continued early this week. The reasons for its
rally are a combination of excessively short positions and the expectation of higher US interest rates. The
higher public deficit and inflation implied by tax cuts and increased spending has driven 10-year bond yields
to a four-year high of 3% and that, in turn, has sucked in buyers of bonds and the dollar. The growth eased off
midweek, when the US dollar strengthened by an average of 0.2%, sharing second place with the euro and
the Canadian dollar. Houses were up by an annual 6.8% according to the Case-Shiller index of metropolitan
prices. The Federal Housing Finance Agency's Housing Price Index came in at 0.6%, down from the previous
month's 0.9% but a tick better than forecast. New home sales were up by a monthly 4.0%, more than twice
the predicted 1.9%. The only disappointment was the Richmond Fed's manufacturing index, which fell 18
points to -3. The US 10-year treasury bond yield moved above 3% which helped the US dollar, it offers a better
return than any other major government can offer, save for Mexico, Brazil and India. In contrast, Britain's 10-
year government bonds return 1.54% and Germany's 0.63%.
Canada's dollar was winged by some slightly disappointing statistics on Friday. A 0.4% monthly rise in
Canadian retail sales relied entirely on car sales and inflation at 1.4% was a tick below forecast. The Canadian
dollar lost four fifths of a cent on the day but positive sentiment towards the Greenback helped it avoid more
damage. Stephen Poloz, the governor of the Bank of Canada made an appearance at the Senate Standing
Committee on Banking, Trade and Commerce, accompanied by Senior Deputy Governor Carolyn Wilkins. In
his speech, he highlighted that the economy was "finally positive" after a long adjustment to a sharp fall in oil
prices, but he added there was still softness in several areas of the country. Poloz also told the Senate's
banking committee that while interest rates would go up from their current low levels, moving too quickly
could create a financial stability risk.
The Australian inflation data came in a tick short of expectations at 1.9% while the Reserve Bank of Australia's
"trimmed mean", at the very same level, was a tick above forecast. For the Aussie it was a no-score draw.
The NZ dollar had a difficult time last week; technical factors weighted against it and there was nothing this
week to reverse the trend. In 2018 it has tracked a horizontal range against the US dollar mainly between
US$0.72 and US$0.74. Having touched the top of that range ten days ago, and failed to break higher, it headed
back towards the 0.72 support.
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