Daily Brief

Daily Brief

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A convenient truce

Learning to relax

Investors spent Wednesday congratulating themselves on the way Iran and the United States had stepped back - at least temporarily - from their militaristic posturing. Oil fell to a four-week low. The yen lost nearly 1% to the US dollar and also, as it happened, to the pound.

With a recent history of mutual antagonism that goes back 40 years to the US embassy hostage stand-off, it is unlikely that the leaders in Washington and Tehran are about to become best friends. However, the sensation is that they have at least come to the conclusion that nothing is immediately to be gained by armed conflict. For that, investors are grateful and they showed their appreciation on Wednesday by shipping in risky assets and offloading safe-havens. 

Gold fell 4% from a six-year high. The South African rand strengthened by 1.5%. Yes, gold was arguably overstretched at a seven-year high above $1,600 and the rand has been either the biggest winner or the biggest loser every day since Christmas, but the shift in sentiment is clear. Washington's trade truce with Beijing and its military truce with Tehran are going down well with investors.

Marking time

The safe-haven and emerging-market currencies aside, exchange rates did not do a great deal once the panic had abated. Sterling and the US dollar were unchanged against one another, a millimetre behind the leaders. First place was shared four ways among the antipodean dollars and northern Scandinavian crowns.

The poor German factory orders data had not come as a great surprise but were still unhelpful to the euro. It eventually lost a third of a cent to sterling, alongside the Swiss franc. By the same token, unexpectedly stronger UK house prices were only of temporary help to sterling. Weaker-than-expected retail sales data from Sweden and Britain did little damage to their respective currencies.

The European Commission's confidence readings were also a non-event, because they were close to analysts' forecasts. Even a strong employment change figure from ADP failed to move the US dollar.

Central bankers

Senior figures from the Bank of England, the Federal Reserve (three of them), the Bank of Canada, the European Central Bank and the Bundesbank have speaking engagements today. There are also plenty of ecostats on the agenda, half of them already released.

Australia's trade surplus widened in November with imports falling and exports going up. Chinese inflation was unchanged at 4.5% as pork prices rose more slowly. Although German industrial production fell 2.6% in November, it was still 1.1% above the same month last year. Swiss retail sales were flat in November.

There is not much else to come from Europe: Italian and pan-Euroland unemployment will easily be overlooked. The same will probably be true of the weekly US jobless numbers and Canadian housing starts and building permits. So, it will come down to the seven central bankers, and none of them is likely to be intent on making waves.

JPY: Safe-haven appetite dries up

JPY: Safe-haven appetite dries up

ZAR: Investors embrace risk

ZAR: Investors embrace risk

GBP: Goes with the flow

GBP: Goes with the flow

USD: Flat against sterling

USD: Flat against sterling

EUR: Not helped by German data

EUR: Not helped by German data

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