More UK jobs

On Friday, the rising price of oil led to a win for the Norwegian krone. Yesterday, oil went up by almost as much, yet the NOK struggled at the back of the field with the USD and CHF. It was a reminder that, because markets usually react in this or that way, they do not always do so.

That is certainly the case with sterling, which has historically been one of the most fickle major currencies, even prior to Brexit. Its caprice does not always work against it though: it took first place on Monday for the third time in six working days. The pound did, however, have to share the lead with the Canadian dollar, as it did for the week and the month to Monday. Sterling’s showing owed at least something to the readiness and ability of the NHS to ramp up vaccinations in response to an increase in infections.

The pound’s rally took place during Monday afternoon and overnight. The UK employment data released this morning showed “some early signs of recovery” with payrolls growing for a fifth consecutive month. However, investors are conscious that the government’s various job retention and support schemes have a distorting effect on almost every aspect of the data, and that it will be some months before the statistics become comparable with those from prior to the pandemic.

Slower starts

There were no top-tier economic statistics during Monday’s London session. Arguably the most interesting one was Canadian housing starts, which have been rattling ahead at a breakneck pace in the last couple of months. Yesterday’s number missed forecast but was still among the highest ever.

One measured take on the situation came from Reuters, who commented that “Canadian home sales, prices and starts all fell in April compared with the previous month, as some of the frenzy of recent months began to unwind”. The other North American statistics came from the States, with the NAHB housing market index holding steady at 83 and the New York Fed’s manufacturing index slipping two points to 24.3. Neither raised any eyebrows.

Federal Reserve Vice Chairman Richard Clarida made a high-level speech about “Sovereign markets, global factors” and said separately that the bank will “give advance warning” of any intention to taper its QE asset purchases. The Bank of England’s Gertjan Vlieghe downplayed the chance of a UK economic boom, speaking instead about “temporarily high growth rates and temporarily high inflation in the coming months”.

GDP x2

Updated first quarter gross domestic product data from Japan and the Eurozone feature on today’s agenda, as well as US housing starts and building permits. The UK inflation figures will appear ahead of London’s opening on Wednesday.

Japan’s economy contracted by a quarterly 1.3% in Q1, according to the latest revision. The number was roughly in line with forecast. Also overnight, the Reserve Bank of Australia published the minutes of its May policy meeting. They appeared to point to an extension of the quantitative easing programme.

European data this morning will cover Italian trade, Eurozone GDP – a quarterly shrinkage of 0.6% is forecast – Eurozone trade and Eurozone employment. After lunch come US housing starts and building permits. NZ producer prices appear tonight, followed by Australian consumer confidence and Japanese industrial production.