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Currencies ignore widespread political disarray

Almost a hero

If it was not the dullest day on record Friday was certainly among the contenders for that dubious distinction, with just 0.7% separating the field.  At one point the Canadian dollar promised to be the hero but in the end it had to share first place with three others.

Alongside the Loonie the Swiss franc, the Australian dollar and the South African rand led sterling by 0.3%, equating to three fifths of a cent for the Canadian and Australian dollars. The Norwegian krone brought up the rear, down by 0.4%. On average, the pound was just about flat on the day and it was almost unchanged against the US dollar, the euro, the yen and the Swedish krona.  

The Loonie's break came with the Canadian employment data. Although the rate of unemployment ticked up to 5.8% it did so with a higher participation rate and an increase of nearly 69k jobs, way above the forecast 8k rise. The figures were worth over half a cent to the Loonie, which more than compensated for its earlier decline. Unfortunately, lower oil prices spoiled what might otherwise have been a good day.

Politics and trade

Sterling had a good day on Thursday, for no concrete reason. Technical support and renewed optimism about a favourable Brexit deal outweighed caution from the Bank of England governor, to the extent that the pound was the day's top performer. It starts today an average of 0.2% above Thursday morning's levels.

Time will tell whether their naiveté is justified but investors seem to believe that, now the leader of the opposition has joined the debate, parliament will find a solution. That confidence will be put to the test today by the prime minister's rejection of the customs union which is at the heart of Labour's proposal.

In Europe there is tension between France and Italy after Italy's deputy prime minister gave his tacit support to the gilets jaunes anti-Macron movement. President Macron recalled his ambassador from Rome. In the States there are doubts about the outcome of trade talks with China. In theory, if they are not successful by the end of the month new tariffs will be imposed. There is also concern that lack of agreement between the administration and Congress  will mean another government shutdown on Friday.  

UK economy

At half past nine the Office for National statistics released a slew of UK economic data. They will be the only statistics of any consequence to the FX market during the London session and fall under four main headings: gross domestic product, investment, international trade and output.   

Gross domestic product is forecast to have expanded by 0.25% in the fourth quarter of 2018, a shadow of the 0.6% growth achieved in Q3. It is a safe bet that business investment declined in calendar 2018; analysts believe the fall could be as much as 3%.  

Manufacturing and industrial production are expected to have increased in December after falling in November, but not by much. Britain's trade deficit is supposed to have narrowed slightly in December but the number, whatever it is, will have less impact than the GDP and output figures.

CAD shares the lead after strong jobs numbers

CAD shares the lead after strong jobs numbers

GBP flat as Brexit optimism is reassessed

GBP flat as Brexit optimism is reassessed

USD unchanged, awaiting trade and budget solutions

USD unchanged, awaiting trade and budget solutions

EUR steady despite Paris/Rome spat

EUR steady despite Paris/Rome spat

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