Daily Brief

Daily Brief

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Soggy sterling

Unloved

Sterling looked somewhat unloved at the end of last week. Among the big currencies only the NZ dollar did as badly. The pound did nothing spectacularly wrong but it is down by an average of 0.7% from Thursday's opening levels.

It is also fair to say the pound did nothing particularly right either. The UK manufacturing sector purchasing managers' index on Thursday was a touch better than last month's provisional figure but at 47.5 it was still lower than analysts had predicted. It showed output contracting "at the fastest pace in seven and a half years" with job losses reported for a ninth straight month and output and new orders falling sharply. Friday's construction PMI was even less pretty, a point and a half lower than expected at 44.4. It noted the "sharpest fall in civil engineering activity since March 2009". 

The BRC shop price index showed prices continuing to fall as a result of "receding inflationary pressures, weak consumer demand and intense competition". House prices crept ahead in December, leaving them 1.4% higher on the year. Mortgage lending remained steady in November, and in line with levels seen over the past three years.

Oil pressure varies

The US air strike against Iran whipped away the security blanket that had cocooned risky assets following the news of a Sino-US trade agreement. The safe-haven yen is the top performer, up 0.9% since Thursday morning, and oil prices are 5% higher.

The effect of those higher oil prices was asymmetric: On Friday, the Canadian dollar strengthened by 0.5%, putting itself in the lead for the day, while the Norwegian krone was down by 0.2% at the back of the field. Economic data played no part in shaping those different fortunes. Canada's manufacturing PMI was at a four-month low of 50.4 while Norwegian unemployment fell to 3.8%.

Thursday's other manufacturing PMIs were a reminder that, on the whole, the US economy is in better shape than Europe. The two American manufacturing PMIs came in at 52.4 and 47.2, an average of 50. France cracked the boom/bust barrier with a 50.4 and Greece topped the table once again but the rest of the European readings showed varying degrees of decline.

Services PMIs today

The services sector PMI is usually more resilient than manufacturing and construction. People can postpone the purchase of a house or mobile phone but they still need a haircut or a bus ticket every so often. 

Australia narrowly missed the cut this morning at 49.8. Britain and Germany are the only others expected to come in below 50. In Germany, services activity has held up even though manufacturing has crumbled. A score of 52 is pencilled in there.

Other data today cover German retail sales, euro zone investor confidence and Canadian raw material and industrial product prices. Tonight brings NZ business confidence and Australian job advertisements.

GBP: Joint weakest among the majors

GBP: Joint weakest among the majors

NZD: Down there with sterling

NZD: Down there with sterling

JPY: Safe-haven higher on Iran tension

JPY: Safe-haven higher on Iran tension

CAD: Prospers on higher oil prices

CAD: Prospers on higher oil prices

NOK: Fails to prosper on higher oil prices

NOK: Fails to prosper on higher oil prices

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