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Uninspired

Doldrums

To describe Wednesday's exchange rate movements as modest would be a gross understatement. The gap between the leading Swiss franc and the lagging US dollar, Japanese yen and Swedish krona was 0.3% - equivalent to a third of a US cent. In the great scheme of things that is no movement at all.

Ahead of London's opening, it looked as though the US dollar might make the running. By mid-morning it had lost momentum and by lunchtime it was on the defensive. It eventually lost an immaterial sixth of a cent to the pound and the euro. The safe-haven Swiss franc edged further ahead of the safe-haven Japanese yen, extending the lead that it has built since early January and touching a 13-month high. The euro, the Canadian and Australian dollars and, for good measure, the South African rand were exactly unchanged against sterling.

As for why nothing happened in the FX market yesterday, it can probably be ascribed to the anticlimax of Washington's phase one trade agreement with Beijing. The deal has been "imminent" for months, so the impact of its implementation was inevitably muted. Investors are also aware that the deal does not do away with trade tariffs, it simply limits their proliferation. In theory it sets the stage for a phase two agreement but investors are not holding their breath.

Inflation

Most of yesterday's UK inflation data came in lower than expected. The consumer price index rose 1.3% in the year to December while the retail price index was up by 2.2%. The numbers had no lasting impact on the pound.

Sterling was already on the back foot ahead of the CPI figures, courtesy of another MPC member coming out as a dove. Michael Saunders, an external member of the Bank of England's Monetary Policy Committee had been speaking in Ireland about "Risk management in a sluggish economy". The drift of his argument was that "Britain risks getting stuck in a low-inflation trap if the central bank does not take early action to boost the economy".

The blow-forecast inflation data provoked another downward kick for sterling but there was no follow-through. Neither Mr Saunders nor the CPI data told investors much that they did not already know: If the MPC does not take rates lower on 30 January, it might do so at its next opportunity on 26 March.

No movement on the radar

Investors who were unable to find stimulus among Wednesday's data and events are unlikely to be any more inspired by today's agenda. The only obvious potential catalysts are US retail sales after lunch and an appearance by European Central Bank president Christine Lagarde this evening.

This morning the Bank of England publishes its Credit Conditions Survey, the ECB prints its monetary policy meeting accounts and the South African Reserve Bank is expected to keep its benchmark interest rate unchanged at 6.5%.

After lunch, US data cover retail sales, import and export prices, weekly jobless claims, business inventories, international capital flows and the NAHB housing market index. Chinese ecostats tonight cover fourth quarter GDP, industrial production and retail sales.

CHF: Leads for a second day

CHF: Leads for a second day

SEK: Shares last place for a second day

SEK: Shares last place for a second day

GBP: Unhurt by below-forecast inflation

GBP: Unhurt by below-forecast inflation

JPY: Touches 13-month low against CHF

JPY: Touches 13-month low against CHF

ZAR: No change expected from SARB

ZAR: No change expected from SARB

EUR: ECB president speaks this evening

EUR: ECB president speaks this evening

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