VERY LITTLE GOOD NEWS FOR THE POUND
Almost every UK statistic disappoints. BoC statement sends the Loonie higher.
A two-and-a-half-cent range encompassed the shortened week. The Loonie collected a cent and a half on Tuesday afternoon and sterling spent the rest of the week trying to make it back. By the time London opened this morning it had made a decent fist of the task, leaving the pound half a cent better than last Tuesday's starting point.

With one exception the week's UK economic statistics were lower on the month, lower than forecast, or both. Mercifully, it was a short list. Mortgage approvals in April numbered 45.2k, the lowest number for that month since records began in 1993. Purchasing managers' indices for the manufacturing and services sectors were down on the month, down on forecast, at 52.1 and 53.8, respectively. The sole glimmer of light came from May's construction sector PMI. At 54.0 it beat the 53.3 recorded in April and just managed to pip the 53.8 predicted by analysts.

And that was it really. Sterling did not have much to say for itself and investors were unimpressed with the few things they did get to hear. One research firm, Markit, summarised the week's figures as reducing the upward pressure on inflation and pointing to growth of no more than 0.3% in the second quarter of the year. On both counts they militated against any early interest rate increase from the Monetary Policy Committee.

The Loonie did not have a great deal to say either, apart from the raw material and industrial product price indices, neither of which created any waves. What did get the market going, however, was the Bank of Canada's statement following its monetary policy meeting. Whilst keeping its benchmark interest rate steady at 1% the BoC said in its statement that it would "eventually" have to take rates higher. Given that it was only a couple of weeks ago that BoC governor Mark Carney said he would be giving less rate guidance in future, investors optimistically decided that "eventually" might mean tomorrow afternoon. They piled into the Loonie, taking it a cent higher.

This week the Canadian data are more prolific than last. Already, there has been housing starts, building permits (down -21.1% versus -2.3% forecast)and the new housing price index, the Ivey PMI (69.1 versus 59.1 forecast) and the balance of trade. Top of the list are Friday's employment figures, particularly the net change in employment which is forecast to show 20k new jobs after 58.3k in April.

There are some middle-weight figures from the UK including the trade balance, producer prices and manufacturing and industrial production. Thursday's interest rate decision from the MPC will be significant only in the unlikely event that it delivers other than a "no change" verdict. Otherwise it will be the minutes of the meeting in a couple of weeks' time that are more important.

Although sterling has twice poked its head above the six-week-long horizontal trend it still does not look comfortable up there. Buyers of the Canadian dollar should continue to hedge their risk, and consider fixing a price for up to half the money they need with a forward purchase.

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