No worries

In view of the Brexit bickering at the G7 meeting and the four-week delay to a relaxation of Covid restrictions, the pound made a surprisingly resilient start to the week in the Far East this morning. Hope deferred is not, it seems, hope denied for the pound.

In an escalation of the cold sausage war, the French president accused the UK government of polemicism. Britain’s prime minister said he would “do whatever it takes to protect the territorial integrity of the UK, even to the extent of suspending the Northern Ireland protocol, which he championed 18 months ago. On the domestic front, the government has let it be known that there will be at least a four-week postponement to any easing of the Covid lockdown because of growing numbers of Indian delta variant infections.

So far today, investors have shown no inclination to punish sterling for these developments. Perhaps they attach greater weight to UK economic data published on Friday, which showed that UK exports to the EU have “broadly recovered” from their Brexit trough, even though imports continue to struggle. On average the pound is unchanged from Friday morning.

Delayed reaction

The lion’s share of Friday’s economic data were generated by the UK and they were mostly supportive of the pound. Sterling did not immediately react positively to the numbers; it was more than an hour later that it began to move higher.

Although manufacturing and industrial output both declined in April, they still managed annual increases of 39.7% and 27.5%. The trade deficit narrowed in April, beating analysts’ forecasts. Gross domestic product expanded by 2.3% in April, the fastest monthly growth since July 2020. The economy remains 3.7% smaller than it was in February last year before the pandemic began to make itself felt. Separately, the National Institute of Economic and Social Research estimated that UK GDP grew 3.8% in the three months to end-May.

German wholesale price inflation picked up to 9.7% in May, the biggest annual increase in 13 years. Spanish consumer price inflation was in line with earlier estimates, with the CPI 2.7% higher on the year and the EU standardised HICP up by 2.4%. In the United States, the Michigan index of consumer sentiment improved by four and a half points to a provisional 86.4.

NZ visitor numbers soar

A dull day is in prospect for students of global economic data. Ahead of Tuesday’s opening, the most excitement is likely to be found in tomorrow morning’s UK employment figures.

Although it is currently a rather meaningless number, grossly distorted by the imposition and relaxation of Covid travel restrictions, the most entertaining statistic overnight was for NZ visitor arrivals. In April, there were 31,900 of them, a 1755.4% increase on the same month last year. Business NZ’s performance of services index was five points lower on the month but, at 56.1, still above its long term average of 53.9.

There is not much else to pitch at today. Swiss producer prices and Eurozone industrial production appear this morning and Canadian manufacturing sales at lunchtime. Antipodean data tonight cover NZ consumer confidence and Australian house prices.