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Home Opinion Opinion Sterling gets a smack that it won't easily forget
Sterling gets a smack that it won't easily forget PDF Print E-mail
Written by Mark Deans at MoneyCorp   
Tuesday, 02 March 2010 10:27
This morning's Mark Deans column: Investors worry that parliament will be hung.



Good morning.

At the end of what the Met Office describes as Britain's coldest winter for 30 years the House of Commons Science and Technology Committee was interviewing Phil Jones yesterday.

The University of East Anglia's chief global warming spin doctor admitted that he had 'written some very awful emails' in an attempt to stifle scientific debate of the political orthodoxy that global warming is a man-made phenomenon.

Professor Jones has been bubbled, just as has Conservative party benefactor Baron Ashcroft of Sumwerelse.

Backed into a corner on the question of where he paid tax, the noble lord had to concede that, wherever it was it, was not Britain. Whilst the jiggery-pokery of Phil Jones has few, if any, implications for the pound, the same cannot be said of Michael Ashcroft's tangled web of tax efficiencies.

Investors are seriously worried that neither main party will come out of the general election with a working majority and that the ensuing squabbles will hamper efforts to balance the budget.

It is possible that the Ashcroft saga will eat even further into the Tories' slender lead as new details filter through. And those worries were uppermost in the mind of the market on Monday. With chart targets cluttering the radar, investors gave sterling a smack that it will not easily forget. Cable dropped nearly four cents in half as many hours. The pound lost three and a half yen, four Canadian cents, and created new lows against the Australian and New Zealand dollars.

The economic data had nothing to do with it. UK mortgage approvals (Bank of England figures) were down in January but came as no surprise. Britain's manufacturing purchasing managers' index was steady at 56.6, thus better than expected. It was two points ahead of the euro zone figure and within a tick of the US number. It is not reasonable to blame Prudential's takeover of AIA for the pound's retreat. The $35 billion involved would account for less than 7% of sterling's turnover, even were it to be thrown at the market in a single day. Prudential's treasurer would have to be a bit of a clown to pull a stunt like that. And he isn't.

Such was the irrelevance of ecostats to Monday's carnage, it is almost pointless to consider today's official agenda. However, for good orders' sake, Switzerland has delivered a stronger than expected +0.7% GDP expansion in the fourth quarter. Australian building permits were down by 0.7% in January while retail sales were +1.2% higher. The Reserve Bank of Australia delivered the 25 basis points of tightening that everyone expected, taking the cash rate to 4.0%.

Britain's construction sector PMI should be roughly steady; it has no foreign equivalent so there are no invidious comparisons to be made. Euro consumer and producer price indices will be of less import than the upcoming meeting between George Papandreou ('you nicked our gold') and Angela Merkel ('das is mein Sonnebett') on Friday. The Bank of Canada will leave its policy interest rate unchanged unless it wants to precipitate a bout of domestic post-Olympics depression. Nationwide's consumer confidence index comes out at midnight.

Investors probably surprised themselves yesterday with the vehemence and success of their attack on the pound. It gives them two options today: a) Take some profits because you can't get away with a trick like that twice on the trot; b) Of course you can.
Last Updated ( Tuesday, 02 March 2010 10:32 )
 

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