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Making bricks without straw

Optimistic reflation

Oil is holding firm at pre-pandemic levels (WTI crude >$58) while share prices around the world are mostly higher. In these, and in other ways, investors are looking unusually optimistic.

Among currencies, that mood is playing into the hands of the “risky” commodity currencies and working against the safe havens. Monday’s winners were the antipodean dollars and Norwegian krone (though not the Canadian dollar). They were an average of 0.3% firmer against the other majors. The US dollar brought up the rear, down by an average of 0.4% and half a cent lower against sterling.

Almost exactly in the midst of those two extremes, the pound was on average unchanged, and exactly flat against the euro and Swiss franc. Overall it was the dull outcome of a dull day. EUR/USD covered a range of less than two thirds of a cent and GBP/EUR moved little more than half that far.

 

Not many numbers

A large part of Monday’s torpor arose from an almost complete lack of tradeable economic statistics. There were some comments from Washington about stimuli and impeachments but they included nothing that investors had not heard before.

After a strong showing in January, the Sentix measure of Eurozone investor confidence dipped back into the gloom zone, falling from 1.3 to -0.2. Sentix highlighted a divergence between Europe and the rest of the world. German investor confidence fell from 9.2 to 8.6, while in the United States it was more than seven points higher at 18 and in Japan it rose from 13.6 to 16.1.

There were no other ecostats during London’s day. There was a speech from European Central Bank President Christine Lagarde, but it was not particularly illuminating. Ms Lagarde was presenting the ECB’s annual report to the European Parliament. Her text included no policy revelations, focusing instead on the need to “maintain and strengthen the common European approach” and “improve our communication with European citizens”.

 

Chinese inflation

Today’s agenda promises little more inspiration than Monday’s. Not until the early hours of Wednesday does the first high-profile ecostat appear; Chinese inflation. The UK and European numbers are almost all done and there is nothing of any consequence from North America.

According to the British Retail Consortium, “January saw retail sales growth decline to its lowest level since May of last year” as a result of the lockdown. Even so, sales were up by 7.1% from the same month last year. NAB’s Monthly Business Survey found Australian business confidence rising while conditions deteriorated. The Reserve Bank of New Zealand’s survey of inflation expectations put CPI 1.89% higher in two years’ time. As usual, it was higher than the 1.4% inflation rate reported most recently for Q420.

Germany reported a slightly larger trade surplus for December as exports rose by 0.1% and imports fell by the same proportion. Italian industrial output this morning will complete the European agenda. America’s NFIB small business confidence index comes this afternoon, followed by the US Bureau of Labor’s JOLTS count of job vacancies. Tonight brings Australian consumer confidence and new home sales, followed by Chinese inflation.

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