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War of the words

Manipulation

When US secretary of state Mike Pompeo called in on his Chinese counterpart he was treated to some uncharacteristically blunt language. But at least he would not have gone there expecting a slap on the back. More bizarrely, the White House apparently wants to list China as a "currency manipulator" because of the way its currency has declined since the US president started a trade war intended to cripple its economy.  

To fill the gap created by a shortage of economic data yesterday, politicians around the world were having a go at one another. The main beneficiary was the safe-haven Japanese yen and the South African rand was the biggest loser, as it has been on four of the last five days.

The rand's problem on this occasion was finance minister Nhlanhla Nene. He was reported to have resigned because of his contact with people involved in a long-running corruption scandal. A daily loss of 0.4% for the rand left it 4.9% below its level a week ago. At the other end of the scale the yen was up by 0.7%. A seventh consecutive day of losses for the MSCI Asia Pacific equity index is a symptom of the nagging nervousness among investors that has not been mitigated by some of yesterday's fighting talk.

The blame game

Italy's right wing deputy prime minister Matteo Salvini joined Marine Le Pen, his anti-immigrant opposite number in France, to have a go at the EU.  Stopping short of using the word "conspiracy" he blamed George Soros, Jean-Claude Juncker and Pierre Moscovici for the recent rise in Italian borrowing costs.

Investors were not taken in by Sig. Salvini's rhetoric. They are all too aware that it is his deficit budget plans and questions about the country's continued membership of the single currency that have made Italian government debt a less attractive proposition. The situation there is of no help to the euro.

It did not make a great deal of difference yesterday though. There was little to choose between the euro, the pound and the US dollar, which changed by less than a dozen ticks against one another. As noted, there were no economic statistics to affect the direction of travel.

The use of RPI

Bank of England deputy governor Ben Broadbent will be talking to the House of Lords Economic Affairs Committee this afternoon. He is not likely to have an impact on the value of sterling but nor is anything else on the schedule.

Employees and pensioners with index-linked incomes love RPI as a measure of inflation because, in recent years, it has been consistently higher than the consumer price index (latest 3.5% vs 2.7%). Employers and pension funds are understandably less keen as, also, is the Bank of England. It will be interesting to hear what Mr Broadbent has to say an the matter.

Otherwise, there is not much else to shoot at on today's agenda. US small business confidence, Canadian housing starts and that's about the lot.

GBP flat against euro and Greenback

GBP flat against euro and Greenback

EUR unfazed by Salvini's accusations

EUR unfazed by Salvini's accusations

JPY higher again on safe-haven demand

JPY higher again on safe-haven demand

CNY attracts White House attention

CNY attracts White House attention

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