| Looking back at a good day for Pound Sterling |
|
| Written by Mark Deans at MoneyCorp | |
| Wednesday, 17 March 2010 09:29 | |
|
In this morning's Mark Deans column: A good day for sterling - 'Minister; Tax may rise' - MPC minutes and EU report today. Good morning. The Thriplow daffodil festival, which opens at the weekend in Hertfordshire, will be lacking its raison d'être this year because of the late coming of spring. As Wordsworth might have put it; 'I wandered lonely as a cloud, that floats on high o'er woods and bowers, when all at once I saw a crowd, of people saying "Where's the flowers?"' A different search was going on in Whitehall as journalists tried to track down Treasury Secretary Liam Byrne. After the leaked EU Commission report, which criticised the government's lack of commitment to cutting its deficit, they wanted to know if he had any update on last week's promise of no post-election tax increases. The BBC was first to pin him down, asking if he would stand by his promise. He replied 'No, I mean chancellors reserve the right to come back to tax matters at every budget.' The admission earned a 'told you so' from investors, who were a little less antsy about the country's future political make-up after an opinion poll in The Guardian gave the Conservatives a 40-31 lead over Labour. Having leaned hard on the pound sterling ahead of London's opening (arbitrarily taken to be 08:00h, even though most dealing rooms are up and running before then) investors quickly came to the conclusion that a re-run of Monday morning's raid on pound sterling would be overdoing it. It helped things along when the government's own house price index rose by +6.2% in the year to January, nearly twice as much as forecast, and by +2.2% on the month. A general upswing in risk-appetite left the US dollar and the yen feeling abandoned while sterling led the 'risky' commodity currencies higher. A speech by Bank of England Deputy Governor Charlie Bean repeated the MPC's party line - that quantitative easing remains a tool to be used again if necessary - but did no obvious harm to the resurgent pound sterling. It starts today more than two yen and two US cents higher and it has held onto most of its gains elsewhere. The next hurdles for sterling are this morning's employment figures and the minutes of the MPC's meeting earlier in the month. There has been enough warning from the Bank about its reluctance to give up the QE club - even if it never comes out of the bag again - to avoid any unpleasantness when the minutes reiterate that point. As ever, investors will scroll straight to the end of the document to see how the voting went. More votes for QE mean fewer buyers for sterling. An opinion poll in this morning's Sun has narrowed the Tories' lead to 37-32 but the market has chosen, so far at least, not to run with it. The remainder of the day's data include Euroland construction output, US producer prices and Canadian wholesale sales. They are all worthy statistics but (barring accidents) are nowhere near important enough to have any real impact while the market is in its current mood. Investors seem unable to stick with any decision for more than about 48 hours, pushing currencies hither and yon, often for inexplicable reasons. In a market like this the trick is to sell the peaks or buy the troughs, for both are sure to crop up at some point. Do not hesitate to pester your account manager for advice on when and where to look for them. And don't forget to keep an eye out for that EU Commission report on all the other fiscally irresponsible nations in Europe. You never know, it might reflect positively on the pound. 
|
|
| Last Updated ( Wednesday, 17 March 2010 09:31 ) |