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Good morning. In an effort to divert his citizens from their protest the Egyptian president has agreed a 15% pay rise for the public sector. Looking at the US$960 million set aside to cover the increase, and assuming it is an annual sum, the average government employee will see his monthly pay go up by $13 to $102. He had better hurry up and spend it though. The latest CPI data showed prices rising at 9.65% a year and lobbing out a 15% pay rise to six million people is not going to bring that inflation rate down in a hurry.
Spending on Britain’s high streets in January was at an appreciably higher level than it had been in arctic December. The British Retail Consortium reported that sales were up 2.3% by value as people took advantage of new year discounts and bought the things that bad weather had prevented them buying before Christmas. It was not all good news though. A rush of sales in the first few days of January was followed by a slowdown in the second half of the month. The BRC announcement at midnight coincided with an improved (but still rubbish) RICS house price balance, which went up from -39% to -31%. House prices might not be falling as viciously as they were at the end of last year but they are still falling.
Even though those two figures were the only ones that mattered to sterling, the pound displayed no reaction whatsoever. Nor had there been any reaction earlier in the day when Euroland investor confidence improved from 10.6 to 16.7 and German factory orders fell by -3.4%. A 2.4% rise in Canadian building permits similarly failed to inspire the market. That lack of inspiration kept the major currencies in one-cent ranges that resulted in net gains or losses of half a cent or less. The Australian and New Zealand dollars led the field, helped by a mood of optimism for the global economy.
That optimism ought not to be tested too severely today. Another very short list of data announcements starts with German industrial production and ends with Canadian housing starts. There is nothing in the middle and nothing obviously calculated to jog the FX market out of the cosy equilibrium it has enjoyed since Friday.
