Disappointed investors sell sterling
Australian employment change much worse than expected

For most of the week sterling pottered around in a range of less than two cents. On Friday it dipped sharply, falling two and a half cents, and in early trade this morning it rebounded by a similar distance. It opened in London about a cent and a half worse off on the week but looking positive.

All things considered, Britain made a decent fist of the week's economic statistics. The only disappointment was a weak retail sales number from the British Retail Consortium, which had sales down by -0.4% in February compared with a year earlier. The RICS house price balance moved in the right direction, improving from -31% to -26%. January's trade deficit came in lower than expected and the ex-EU deficit turned out to be only half as wide as forecast. The figures were in no way good but there was relief that for once the word "record" was not involved. UK industrial and manufacturing production were stronger than expected in January, up by an annual 4.4% and 6.8% respectively. The National Institute for Economic and Social Research estimated the economy grew by 0.2% in the three months to February; not bad considering it included a horrible December performance. Factory gate prices rose at a faster pace, up by 5.3% in the year to February. So what did sterling do wrong to leave it at the bottom of the pile on the week?

It was the Bank of England again. The Monetary Policy Committee left the Bank Rate unchanged at 0.5%. Although that was exactly what most people had expected, many investors had prepared for the announcement by buying sterling, just in case the MPC were to spring a surprise increase. When it didn't, they sold off any excess holdings, sending sterling lower. There will be no more solid information on the interest rate situation until 23 March when the minutes of the meeting are published. That also just happens to be the day the chancellor unveils his 2011 budget.

The economic data from Australia were an unprepossessing bunch. The only one that looked reasonable was NAB's survey of business confidence in February, which jumped from 4 to 14. It was at odds with Westpac's take on consumer confidence; that fell from 1.9% to -2.4%. Home loans were down by -4.5% and investment lending was -6.8% lower.

The big disappointment came with February's employment data. After reporting 24k new jobs in January the Australian Bureau of Statistics was expected to come up with another 21k in February. It did no such thing. The January figure was slashed to 7,700 and 10,100 jobs disappeared in February. What should have been a total of 45,000 new jobs over the two-month period turned into the loss of 2,400 jobs. The Aussie took another hit a couple of hours later when China reported a US$7.3 billion trade deficit for the same month.

On this week's agenda from Australia there is nothing with any huge significance, only vehicle sales, housing starts, consumer inflation expectations and the minutes of the Reserve Bank policy meeting. A short list of UK statistics will focus on employment, public sector net borrowing and mortgage approvals.

Sterling is going nowhere fast in what is now its eight-week-old horizontal channel.