Daily Brief

Daily Brief

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Yes but no but

Balanced arguments

Three currencies moved on Wednesday. The Northern Scandinavian crowns recovered Tuesday’s losses, adding 0.7% and 0.9%, and the Japanese yen moved 0.4% higher. The rest of the field barely moved at all. The forces of delight and despair balanced out one another.

There was no lasting effect from the UK consumer price index data, which put headline inflation close to a four-year low at 0.5%. It may tangentially influence the thinking at today’s Monetary Policy Committee meeting but the members have considerably bigger fish to fry. The pound is an average of 0.3% lower, thanks to the booming NOK and SEK.

It was a similar story with the Eurozone CPI figure. At 0.1% it, also, was close to a four-year low. Equally, the European Central Bank has little interest these days in framing monetary policy to shape consumer prices. The ECB, like most other central banks, has bigger Fische to braten. The other Euroland data on Wednesday, for Italian industrial sales and orders, and Eurozone construction, were predictably grim. Construction output was down by an annual 14.6%, Italian sales by 46.9% and orders by 49%.

 

North American impasse

There was nothing to choose between the North American dollars, which were flat against one another. The Canadian inflation figures made little difference to the Loonie. US housing starts and building permits were much as expected and the Fed chairman said nothing new on Capitol Hill.

Investors seemed entirely relaxed about the headline rate of Canadian inflation falling to -0.4%, its lowest level in almost 11 years. A factor in their reckoning will have been that the negative rate was entirely the result of lower gasoline prices. Excluding gas, the CPI was up by 0.7%.

As is customary, when Jerome Powell visited Congress for his second day of biannual testimony he told much the same story as he had on the first. He underlined this time it by telling the House that it would be a concern if Congress were to pull back too quickly from the support that it’s providing.

 

BoE QE

Expectations for today’s Bank of England policy announcement are that there will be an expansion of quantitative easing. It would be a surprise if the bank were not to do at least something on the stimulative side.

Overnight data showed New Zealand’s economy shrinking by 1.6% in the first quarter, a larger than expected contraction. In Australia unemployment rose to 7.1% with a net loss of 228k jobs in May. The Aussie suffered a brief setback. This morning the Swiss National Bank and Norges Bank are both expected to leave interest rates unchanged. After lunch expect to see at least a million weekly new jobless claims in the United States.

Friday begins with UK figures for retail sales and public sector borrowing in May. There ought to be a rebound after April’s 18.1% sales slump but turnover will probably still be around 17% lower on the year. Public sector borrowing will be massive once again, if not quite on the same scale as April’s £61bn. The only other useful data on Friday are for Canadian retail sales, forecast to have fallen by a monthly 15.1% in April.

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