Daily Brief

Daily Brief

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Sterling in a pickle

The long goodbye

It was a dismal and lonely day for sterling. On Monday and Tuesday it had the Australian dollar to keep it company at the back of the field. Yesterday it was on its own, half a cent behind the antipodeans and even further adrift from the rest of the major currency field.

Since Monday morning the pound's greatest achievement has been to lose only half an Australian cent.  It has fallen by an average of 1.1% against the other ten most actively-traded currencies. Sterling's losses over those three days include two yen, two Swiss cents, one and a half US cents and one euro cent. Its poor performance cannot be blamed on the economic data: nitpickers will carp at the slowing earnings growth revealed on Tuesday but the jobs numbers were by no means bad.

Which leaves Brexit, and the havoc it has wrought on the British political system. Investors can see how bad things have become when the  single-issue Brexit party commands a third of the popular vote just four months after its creation. Even though a general election is not imminent - neither of the traditionally major parties would dare call one at the moment - it can be no more than three years away, and a populist UK government is no longer impossible to imagine. Investors are worried, and every day that nothing happens adds to their concern.

Tightly bunched

Leaving aside the Australian and NZ dollars there was not much to choose between the major currencies on Wednesday. The Norwegian krone narrowly beat the Canadian dollar, both of them assisted by an uptick in oil prices.  The US dollar, euro, yen, Swedish krona and Swiss franc were within millimetres of one another, 0.5% ahead of sterling.

Investors rewarded the euro when first quarter growth came in on target at a provisional 0.4% and employment went up by 0.3% in Q1. They rewarded it again when the US administration postponed for six months its plan to hit EU vehicle imports with protectionist tariffs.  

On the other side of the Pond nobody was impressed by the 0.2% monthly decline in US retail sales or the 0.5% fall in industrial production.  There was nothing to excite investors among the Canadian CPI measures, all but one of which were exactly in line with forecast.

Aussie rate cut looms

This morning's Australian jobs figures were not helpful to the Aussie.  Investors focused on an uptick in the rate of unemployment from 5.1% to 5.2%, which they saw as another pointer towards a rate cut by the Reserve Bank of Australia.

There is always a surprise or two among the Australian employment data.  This time the higher unemployment rate overshadowed the greater than expected number of new jobs.  

The remainder of today's ecostats are low-key. Europe's contributions are Italy's inflation and balance of trade and Euroland's trade balance. After lunch Canada reports on manufacturing shipments and the States on housing starts and building permits. Tomorrow's big-ticket item will be euro zone inflation. There is nothing to come from the UK.

GBP: Down again on Brexit bothers

GBP: Down again on Brexit bothers

AUD: Unexpected rise in unemployment

AUD: Unexpected rise in unemployment

CAD: Helped by higher oil prices

CAD: Helped by higher oil prices

EUR: White House postpones car tariffs

EUR: White House postpones car tariffs

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