Daily Brief

Daily Brief

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A bright new year?

Looking up

As financial markets properly got back to work after the holidays, the mood was refreshingly positive. The economic data helped, and the war of words between Washington and Tehran was sufficiently implausible to reassure investors that there was no immediate danger of escalation.

There was initial concern about the US President's threat to attack "cultural sites" in Iran, but the Pentagon and even his own defense secretary  dismissed the notion. The effect yesterday was to restore much of the risk-appetite that had been shattered by the attack last Friday. Japan's safe-haven yen fell from favour, taking last place for the day. After a poor showing with the purchasing managers' indices, the Australian dollar fared no better. Both lost 0.9% to sterling and fell an average of 0.4% against the other majors.

Sterling itself had a good day, as did the Norwegian krone. Both went up by an average of 0.5%, sharing first place for the day. Perversely, the oil-oriented krone did well as oil prices fell, having gone down on Friday in the face of rising oil prices. The pound's saving grace was the UK services sector PMI. At 50, it indicated neither growth nor shrinkage, by no means a brilliant reading but a better one than the forecast 49.2 and not miles out of line with the rest of Europe.

Few negatives

Among the several services and composite PMIs, there were few readings below 50. The composite for Euroland as a whole was positive at 50.9. The services PMI from the States was also comfortably above 50 at 52.8. Neither the euro nor the dollar saw any benefit.

The services PMIs from Europe ranged from Britain's 50 to Spain's 54.9. All of them either matched or beat forecast and all were either higher or unchanged on the month. It would be reading too much into the numbers to take them as a sign that the slowdown has bottomed out, especially as so many of the manufacturing readings had been flaky. But they at least tended more towards optimism than to pessimism. 

German retail sales looked perky with monthly and annual increases of 2.1% and 2.8% in November. There was also a third consecutive monthly improvement in euro zone investor sentiment, which was seven points higher at 7.6. Canadian industrial product and raw material prices were both more positive than expected.

Odd lot

Three is a bit of everything in today's list of ecostats. Japan rather spoiled the trend overnight with an unexpected one-point decline in the services PMI to 49.4 but that should be countered by a strong reading from America's ISM services. There are no UK numbers on the agenda.

Swiss CPI data this morning showed inflation bumping along the bottom at 0.2%, leaving the franc roughly unchanged on average. Italian inflation is pencilled in at 0.6%, while for the euro zone as a whole the number is expected to be unchanged at a preliminary 1.3%. 

Canada and the States report on their balance of trade after lunch. Canada prints the Ivey purchasing managers' index and US factory orders are forecast to have fallen 0.8% in November.

USD: Trump's Iran threat largely overlooked

USD: Trump's Iran threat largely overlooked

JPY: Safe-haven loses support

JPY: Safe-haven loses support

AUD: Joint last after soft PMI

AUD: Joint last after soft PMI

GBP: Shares lead with NOK

GBP: Shares lead with NOK

EUR: Mostly positive PMIs

EUR: Mostly positive PMIs

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