INVESTORS GO FOR RISK AND YIELD
Few ecostats from the UK but positive on balance. Commodity currencies in favour.Sterling lost two cents on the week, falling from $1.79 to $1.77. It took three days for investors to make up their minds but on Friday they decided commodities were back in fashion.
Another week of parliamentary pilferage reports in the Daily Telegraph led to a couple of deferred resignations but still had no negative impact on sterling. The combination of a four-day week and a relative dearth of statistics gave investors less opportunity than usual to get involved.
Such figures that did appear were, on balance, vaguely positive but none was good enough to motivate sterling buyers. The single bad figure was a downturn in the Confederation of British Industry’s Distributive trades survey – in the opinion of many analysts a better indicator of High Street Activity than the official government figures. After an unexpectedly positive +3 result in March the result for April was a more plausible -17. The good figures related to residential property, with the British Bankers’ Association reporting an increase in the number of mortgage approvals and Nationwide’s house price index rising by 1.2% in May. After three months of improvement the Gfk consumer confidence index was unchanged at -27.
If there was a dearth of UK economic data, in Canada it was a drought. The only statistic on offer was a worsening of the current account in the first quarter, from a downwardly-revised -$7.8 billion to -$9.1 billion. This week promises to be more interesting with the Bank of Canada’s interest rate decision and the employment numbers.
The Loonie’s success came not from the ecostats (evidently – there were almost none) but from the market’s continuing drift away from safe-haven currencies and back towards the commodity-producers and high-yielders. The Canadian, Australian and New Zealand dollars all did well.
The pound is entering an interesting technical formation centred on $1.7750. Between $1.75 and $1.80 there is no call to make, especially given the unpredictability of both currencies. Buyers of the Canadian dollar should use a stop order to protect against a surprise collapse but can otherwise hope for a break on the upside.
Post courtesy of TTT Moneycorp
