Daily Brief

Daily Brief

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Trade deal looms

Pound and franc in the lead

Sterling and the Swiss franc were neck-and-neck at the front of the pack on Tuesday. The franc won by the narrowest margin. Their successes had nothing in common. Sterling received an early boost from the prime minister; the franc's help came from the US administration.

In yesterday's interview with BBC Breakfast, Prime Minister Boris Johnson's comments on Brexit were enough to have an impact on the pound. Whilst he claimed a trade deal is "very very very likely", he admitted it is not guaranteed: "you always have to budget for a complete failure of common sense". Rather than dwell on the possibility of failure, investors chose to focus on the PM's opinion that it is "epically likely" that an agreement will be reached ahead of the 31 December deadline. 

Having removed China from its list of currency manipulators, the US Treasury named 10 countries that "warrant placement on the Treasury's 'Monitoring List' of major trading partners that merit close attention to their currency practices: China, Germany, Ireland, Italy, Japan, Korea, Malaysia, Singapore, Switzerland, and Vietnam". Switzerland's inclusion sent the franc higher. The argument is that, with Washington breathing down its neck, the Swiss National Bank will be less enthusiastic about holding down the franc against the euro.

US inflation

The United States monopolised the ecostat agenda during the London session. It was not that US data were plentiful, rather that contributions from elsewhere were conspicuous by their absence.

There were in fact three sets of American data: inflation, small business confidence and the monthly treasury statement. Only inflation really mattered. With the headline rate and core rate aligned at 2.3%, there was nothing obviously to encourage the Fed to adjust interest rates.

Small business confidence was two points lower on the month at 102.7. Not to worry though: the NFIB described optimism as "historically strong". The dollar was on average unchanged.

UK inflation

Today it is Europe's turn with inflation. Three are data from France, Spain and Sweden as well as the UK. Of greater interest to the world at large will be the "phase one" trade agreement between China and the States.

Stability seems to be the order of the day for inflation in Europe. In France, it is unchanged at 1.6%. In Spain, it is flat at 0.8% and Sweden is forecast to be steady at 1.8%. Britain's consumer price index is expected to stick at 1.7% with the retail price index a tick higher on the month at 2.3%. None of those numbers has any real implication for interest rates. 

There are euro zone data this morning for trade and industrial production. Production is likely to be lower on the year. South Africa reports on retail sales this morning. The New York Fed's manufacturing index and US producer prices come out after lunch and the Fed's Beige Book economic assessment this evening.

GBP: Shares the lead on trade deal hopes

GBP: Shares the lead on trade deal hopes

CHF: SNB's intervention power under threat

CHF: SNB's intervention power under threat

CNY: Softer after manipulator label removed

CNY: Softer after manipulator label removed

USD: Inflation steady, dollar steady

USD: Inflation steady, dollar steady

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