USD  

Remaining on the defensive, the USD lost ground on most fronts.  It fell an average of 0.2% against the other major currencies, down by 0.3% against the EUR and 0.2% against the JPY.  News that the White House is involved in trade discussions with Beijing "at all levels", according to economic advisor Larry Kudlow, made little difference to the USD. It was a similar story when the president was reported to be "holding back" from imposing tariffs on auto imports from Japan: Toyota's share price spiked but the USD was unaffected. The biggest item on today's agenda is the US consumer price index data for October. The headline rate of inflation is forecast to have accelerated from 2.3% to 2.5%.

EUR 

The deadline for Italy to submit a new budget for approval by the European Council came and went, without any sign that Rome is ready to reduce the proposed 2.4% deficit. Investors were fully prepared for that, and have resigned themselves to a long wait before there are any further developments. The spread between German and Italian 10-year bonds widened to 311 basis points but the EUR was unmoved. There was little immediate reaction this morning to news that Germany's economy contracted by a provisional 0.2% in the third quarter, pulling growth for the year to September down to 1.1%: investors had been expecting something similar. Pan-Euroland growth of 0.2% was exactly in line with forecast.

CAD 

The only statistic that could have affected the CAD on Tuesday was the price of oil. West Texas Intermediate was down by 5% - $3 - to a level 26% below the early-October highs. Such a move would normally be painful for the CAD but on this occasion it was unchanged on the day against the USD.  

GBP

Sterling reacted positively to the rumour, then the confirmation, that Britain's government and the EU had agreed the draft of a withdrawal deal.  It involves Britain remaining within the customs union for an unspecified time; full details have not yet been released, pending cabinet discussion of the 500-page document this morning. It has taken more than two years to reach this stage of the Brexit process and more obstacles lie ahead: cabinet ministers must either back the deal or resign and it must be approved by Parliament if it is to take effect. Neither of these can be assumed, but the ticking of this important box yesterday meant a step higher for the GBP. It strengthened by 0.6% against the USD.

JPY 

The JPY weakened overnight on news that Japan's economy contracted by a provisional 0.3% (annualized 1.2%) in the third quarter. Because the contraction was in line with forecasts the move was not a large one, and the JPY is fractionally ahead on the day. Date released later by Japan showed industrial production falling by 0.4% in September, a smaller decline than the forecast 1.1%, and capacity utilization reducing by 1.5%. The tertiary industrial index, which measures activity in the services sector, was down by a monthly 1.1%.