Daily Brief

Daily Brief

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Trade matters

Sterling stumbles

On a day with little movement in exchange rates, the pound managed to lose ground against most major currencies. The Australian dollar and Norwegian krone saved it from the embarrassment of last place but only just. Sterling’s problems were mostly political and almost all trade-related.

One of those problems was Britain’s reliance on Huawei in its mobile phone network. The US President is keen to shut Chinese electronics manufacturers out of the infrastructure market and is putting pressure on the UK government to comply. His chief of staff will visit Downing Street tomorrow to pursue that agenda. The concern is that non-compliance would jeopardise a free trade agreement between Britain and the United States.

The second trade concern was the government’s determination to diverge from European standards, apparently as a point of principle. Britain’s chief negotiator David Frost set out in a speech last night his rationale for the coming talks. “We must have the ability to set laws that suit us”. This is not “a simple negotiating position which might move under pressure - it is the point of the whole project”.

A third complication for sterling – though it did little direct damage – was the short-lived career of Downing Street adviser Andrew Sabisky. He resigned after the media brought to light contentious comments he had made in the past. The pound fell an average of 0.3%, losing half a US cent and two fifths of a euro cent.

 

Safety first

The safe-haven Swiss franc took first place, closely followed by the Japanese yen. It is probably fair to assume that coronavirus is at the root of investors’ concern but unclear whether it is the human or the economic impact that has the greatest influence.

The Washington’s Birthday bank holiday in the United States and a general lack of economic data combined to act as a brake on activity in financial markets. Net ranges were a touch wider than on Friday but still only 0.8% separated the leading franc from the lagging Australian dollar. The Aussie suffered a late dip after the Reserve Bank of Australia published the minutes of its policy meeting. They showed that the board did consider a rate cut.

The only other overnight release related to NZ house prices. REINZ’s monthly house price index showed them rising 0.3% in January.

 

UK jobs

The ecostats pace picks up slightly today but there is still little on the agenda from North America. UK unemployment is expected to be steady at 3.8% with a slight slowdown in wages growth. Sweden will also report on unemployment.

UK earnings are forecast to have risen 3% in the year to December, down from 3.2% the previous month. Basic wages are expected to be up by 3.3% on the year, also slower growth than the 3.4% reported previously. In Europe, ZEW reports on economic sentiment in German and the euro zone.

After lunch investors will discover how Canadian manufacturing sales fared in December. The New York Fed will publish its manufacturing index and the NAHB’s housing market index will show how US house builders are feeling. Japan’s trade figures come out tonight.

GBP: Near the rear on trade concerns

GBP: Near the rear on trade concerns

AUD: RBA discussed rate cut

AUD: RBA discussed rate cut

USD: White House leans on Johnson

USD: White House leans on Johnson

EUR: Britain wants different standards

EUR: Britain wants different standards

CHF: Safe-haven is first choice

CHF: Safe-haven is first choice

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