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All is well

A brief panic

There were price spikes all over the shop last night after Iran attacked two US bases in Iraq. Oil popped 4% higher and the yen added a swift 0.8%. An then, after less than six hours, everything had just about returned to normal.

Investors' knee-jerk reaction to the attack was predictable: dump risk and embrace safety. 

However, unusually, both sides then hurried to call an end to the escalation and lower the political temperature. Foreign minister Javid Zarif said that Iran had "concluded proportionate measures in self-defence". The US president said "All is well!" So it looks as though the spat is over, at least officially. The US dollar is almost unchanged on the day against the yen and the two are ahead of the field, but not by far. The euro and pound are on average unchanged against the other majors. 

Few other distractions

Ahead of the events in the Middle East, there was not a great deal to send exchange rates in either direction. The day's economic statistics went almost exactly according to analysts' predictions and there were no political surprises. Less than 1% separated the yen in the lead from the krone at the rear.

Italian inflation was close to expectations at 0.5% and for pan-Euroland it was exactly on target at a provisional 1.3%. Euro zone retail sales were stronger than forecast, up 1% in November and 2.2% higher on the year. 

In North America, the November trade deficits from the United States and Canada both narrowed in December. For the States, exports rose while imports fell: in Canada, imports went down by more than exports. America's second services sector purchasing managers' index was a touch better than forecast at 55.0 and factory orders were down 0.7% in November, much as expected. Canada's Ivey PMI disappointed with a two-point fall to 51.9.

Noting too exciting

Today's agenda is just as unprepossessing as Tuesday's (assuming no new military adventures). There are no first-division ecostats on the list until China reports on inflation in the early hours of Thursday.

Australian building permits enjoyed a strong 11.8% monthly rebound this morning, leaving them just 3.8% lower on the year. German factory orders were typically dismal, falling 1.3% in November for an annual 6.5% decline. In France the trade deficit was a little wider than expected and consumer confidence softened slightly, by three points, to 102.

Britain opens the London session with the Halifax house price index. A clutch of EC confidence measures appear at 10 o'clock. Other than ADP's employment change figure, a precursor to Friday's official US employment report, there are no significant data from North America. Tonight brings Australia's balance of trade and construction PMI and the BRC's figure for UK retail sales.

JPY: Ahead by a whisker after missile launch

JPY: Ahead by a whisker after missile launch

USD: Trump downplays retaliatory strike

USD: Trump downplays retaliatory strike

EUR: Inflation at 1.3% as forecast

EUR: Inflation at 1.3% as forecast

CAD: Trade deficit narrows

CAD: Trade deficit narrows

GBP: On average unchanged

GBP: On average unchanged

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