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Apocalypse postponed

Happy Christmas

A fortnight ago the US President announced new 10% import duties on Chinese goods from 1 September, sending the safe-haven yen higher and the Australian dollar to the back of the field. Yesterday he postponed their introduction until 15 December, sending the Aussie to the front and the yen to the rear.

The President's change of heart came with an acknowledgment that his tariffs make things more expensive for American consumers. He evidently does not want them to feel retail pain in the run up to Christmas. Investors are not sure whether he intends to stick to the new date or if that, too, is a bargaining chip. They were happy, though, to pile into equities and "risky" currencies, leaving the yen with a daily loss of 1% and the Aussie 0.6% higher.

For sterling there was good news of sorts from Edinburgh, where House of Commons speaker John Bercow insisted that he would fight to prevent a shutdown of Parliament by the Prime Minister. When asked by an audience member if Parliament could prevent a no-deal Brexit he said "Yes". There was not much reaction from sterling, which is almost unchanged on average and against the euro and the US dollar.

Not worrying

There was a remarkable lack of reaction to ZEW's surveys of investor confidence in Germany and the euro zone. Economic sentiment plunged in August, yet the euro moved higher after the release. The same was true this morning, to a lesser degree, after an announcement that German gross domestic product shrank 0.1% in Q2.

ZEW's two measures of German investor confidence found economic sentiment tumbling nearly 20 points to -44.1, its lowest level in nearly eight years. The report noted "a significant deterioration in the outlook for the German economy". The equivalent Euroland measure was 23 points lower at -43.6.

UK data yesterday morning showed unemployment ticking up to 3.9% as jobless claims increased by 28k, fewer than expected. The good news was that average basic earnings were 3.9% higher on the year, outpacing inflation by a widening margin. US inflation was up from 1.6% to 1.8%, not enough to deter the Federal Reserve from cutting interest rates.

UK CPI, EU GDP

Today's key numbers are the inflation data from Britain and second quarter growth from the euro zone. Headline CPI is forecast to be up by 1.9% in the year to June. Euroland's economy is supposed to have expanded by 0.2% in Q2.

The agenda opened with surprisingly strong figures for Japanese machinery orders, which rose 13.9% in June. Australian consumer confidence improved from 96.5 to 100 in August. The numbers from China were disappointing: retail sales were only 7.6% higher on the year and industrial production increased by no more than 4.8%. Both numbers were a percentage point lower than expected.

Yet to come, as well as UK inflation and euro zone growth, are Swedish inflation, Euroland industrial production and employment change and South African inflation. The important Australian employment figures appear tonight.

GBP: Wages outpace inflation

GBP: Wages outpace inflation

AUD: Trade war winner

AUD: Trade war winner

JPY: Trade war loser

JPY: Trade war loser

USD: Inflation ticks higher

USD: Inflation ticks higher

EUR: Unbothered by German data

EUR: Unbothered by German data

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