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Argentine beef

The art of distraction

If ever a currency needed a good dose of schadenfreude to cheer it up it was sterling. And it got one yesterday from Britain's key future trading partner, Argentina. When President Macri unexpectedly lost a primary to a populist opponent, the stock market and the peso tanked.

The Merval equity index lost 31% on the day and the peso is 13.5% down against sterling, having traded much lower than that during the initial flurry. Argentina has a long and undistinguished history of defaulting on its debt. The advent of Sig. Macri in 2015 marked a change in the country's perception by investors, such that the government was able two years ago to sell a 100-year bond. Because his likely replacement could lead the country into another default, that 100-year bond traded yesterday at 54¢ on the dollar. 

The Argentine peso is clearly not a major currency. The most recent BIS survey showed it representing 0.04% of global FX turnover (sterling 12.8%). But it was a useful distraction yesterday, as was a re-escalation of the protests in Hong Kong. The pound was able to sneak under the radar and into the lead. It is an average of 0.5% higher against the other majors, with no losses.

Australian business survey

As promised, economic data were in exceedingly short supply on Monday. Investors desperate for a bit of ecostat action could pore over the USDA's World Agricultural Supply and Demand Estimates but most gave it a miss. NAB's Monthly Business Survey was the only report of real note.

It was not particularly exciting: "Broadly the picture from the business survey is unchanged from last month." But nor was it optimistic: "the business sector has lost significant momentum since early 2018 and… forward looking indicators do not point to an improvement in the near term." NAB's two numeric indicators headed in opposite directions: business conditions down from 4 to 2 and confidence up from 2 to 4. The Aussie is a cent and a quarter lower on the day.

Figures from Germany this morning put CPI inflation at 1.7% and EU-standard HCPI inflation at 1.1%. Both were unchanged.

UK jobs, US prices

In contrast to Monday's almost clear slate, some serious data will appear today. For sterling there are the UK jobs numbers, for the euro ZEW's investor confidence measures and for the US dollar July's inflation figures.

Analysts expect the UK rate of unemployment to remain steady at 3.8%, a four-decade low, with annual wage growth picking up from 3.6% to 3.8%. An additional 32k jobseekers are forecast. Investor sentiment is expected to have deteriorated further, both in Germany and pan-Euroland. Headline inflation in the States is seen as edging up from 1.6% to 1.7%. Tonight there are figures for Australian consumer confidence and Chinese retail sales and industrial production.

The UK and EU numbers are unlikely to have a direct impact on monetary policy. An off-the-mark print for US inflation conceivably could, but even there the odds against are long.

GBP: Sneaks into the lead

GBP: Sneaks into the lead

ARS: Election shock ring alarm bells

ARS: Election shock ring alarm bells

AUD: Business conditions mixed

AUD: Business conditions mixed

EUR: German inflation flat at 1.7%

EUR: German inflation flat at 1.7%

USD: CPI data today

USD: CPI data today

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