We come to the last trading day of what has been a pretty dramatic first quarter of the year, which has seen many developed stock markets sell-off, with double digit percentage losses in many cases, only to recover most, if not all, of the losses by the end of the quarter. This in itself has made it a very hard quarter for the tactical and macro players to make money, the underlying narrative having changed several times over the past three months. Compare this to the previous quarters, where we seem to have moved slowly from one obsession to another, be it Greece, tapering, tightening, China etc. For FX, it has also been a quarter where consistent macro themes have been lacking, or at least difficult to trade consistently. Take Japan, where the move to negative rates at the end of January was followed by a sharp rally in the yen, which again the dollar at least has only partially been unwound. Sterling may have been more consistently weaker, but even those playing the longer-term weakness were wrong-footed by the rally from sub 1.40 to above 1.45 on cable over the recent weeks. And finally the dollar finds itself having had the weakest quarter for 5 years (dollar index).
Looking ahead to today, UK markets could well be taking a close look at the final GDP data for Q4, which will provide more details on the household sector and also current account. The current account deficit is a factor that has been dragging down the pound of late as overseas investors become more reticent on buying UK assets in the run-up to the EU referendum in June. Data to be published today by the Bank of England will also reveal if overseas investors remained net sellers of UK government debt in February. In January, they were net sellers by the biggest margin seen in nearly 2 years, which was one of the reasons the pound was falling, even though interest rate differentials were working modestly in sterling’s favour. Elsewhere today, we have inflation data for the Eurozone, where the headline rate is seen holding in negative territory.