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Trump on trade

Out of the blue

Brexit party leader Nigel Farage was sterling's unlikely hero on Monday. His general election strategy announcement was more than enough to dispel any reservations investors might have had about the ropey set of UK economic data. The pound was the day's strongest performer by far, strengthening an average of 0.5%

Yesterday morning's UK ecostats were all a bit rubbish. Gross domestic product expanded by 0.3% in the third quarter and by 1% over the 12 months to September. Manufacturing production fell 0.4% in September and the broader industrial output was down by 0.3%. The trade deficit for the month was wider than expected. It is a measure of just how low the bar is set that the 0.6% annual decline in business investment was the only statistic to come in better than forecast.

There was a surprisingly muted reaction to the numbers. It was a different story when Nigel Farage said his party would not contest Conservative-held seats at next month's general election. Investors decided that the move would help the Tories towards a majority and they marked up the pound. On the day, it added half a euro cent and two thirds of a US cent. 

Nothing to see here

Away from sterling, the FX market was relatively steady. To a large extent that was because the pound, with its monopolisation of the ecostats and the electoral announcements from Farage, was the only game in town.

The US dollar, euro, Swiss franc and Scandinavian crowns made up the middle of the field. At the rear were the yen and the NZ dollar, 0.7% behind sterling, while the Canadian and Australian dollars were a nose ahead of them.

America's trade war continued to feed investors' uncertainty. The latest noises from the White House suggested - perhaps misleadingly - that the President could not care less whether or not he reaches an agreement with Beijing. More may become clear today when Trump addresses the Economic Club of New York.

POTUS and RBNZ

The US president's trade speech and tonight's interest rate decision from the Reserve Bank of New Zealand will be the most significant events in the next 24 hours. Ahead of those, for sterling the main scheduled input will be the UK employment data at half past nine.

UK unemployment is predicted to have been unchanged in September at 3.9%. Wages growth is also expected to have held steady, with average earnings - with and without bonuses - both 3.8% higher on the year. In Europe, ZEW reports on investor sentiment in Germany and the euro zone. Japanese producer prices and Australia's wage price index come out tonight.

It is generally assumed that the RBNZ will cut its official cash rate by a quarter of a percentage point to 0.75%. That expectation has weighed on the Kiwi recently, relegating it to the back of the field on four of the last six working days. It is possible that delivery of a "final" cut tonight could ease the downward pressure. 

GBP: Brexit party retreat lifts sterling

GBP: Brexit party retreat lifts sterling

EUR: An average performance

EUR: An average performance

USD: Presidential trade viewpoint awaited

USD: Presidential trade viewpoint awaited

NZD: Rate cut expected tonight

NZD: Rate cut expected tonight

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