LZs in sight
There was disappointment on many fronts as central bankers expressed continuing concern about the economic impact of Covid and no new vaccines were announced. On Brexit, however, a ray of light glimmered. UK and EU negotiators have apparently identified “landing zones” and this week’s deadline has been pushed back to 28 December.
If correct, the 28 December summit would represent a triumph of brinkmanship for negotiations that began more than four years ago. Officials would not be grateful at having to work through the Christmas holiday to prepare a treaty. Businesses would be less than delighted at the prospect of altering cross-border operating procedures on the fly, with only three days’ notice. But investors preferred to look on what they saw as the bright side on Tuesday and the pound found renewed support.
Where the JPY and GBP shared last place on Monday, they carved out a joint lead yesterday. On average they added the 0.25% that they had given up the previous day. To complete the symmetry, the AUD came last, having been among Monday’s leaders. It was down by an average of 0.4% and lost a cent and a third to the pound.
Push for productivity
In keeping with the newfound Brexit optimism, Bank of England Governor Andrew Bailey delivered a rousing speech which included the inspiring reassurance that “It’s not all dismal news though”. His message was that the City must cooperate with industry to make the productivity investments that have been missing in recent years.
The US Federal Reserve’s Jerome Powell made a similar point when he encouraged Congress and the administration to provide more stimulative spending to support jobs, local government and businesses. Mr Powell’s day was made more interesting when the Senate failed, for the time being at least, to endorse the nomination of Judy Shelton as one of the seven Fed governors. Ms Shelton is an outspoken critic of the Federal Reserve and advocates a return to the gold standard that was abandoned as archaic and unworkable 50 years ago.
Not to be left out, European Central Bank President Christine Lagarde said in an interview that Covid vaccines are not necessarily “a major game-changer” for the bank’s economic forecasts. She gave the impression that when it “recalibrates” its stimulus next month, the ECB will pump up its monetary support.
Inflation and jobs
Yesterday’s ecostats caused scarcely a ripple. US retail sales were a little less buoyant than forecast while industrial production increased by more than expected. The focus today is on UK, EU and Canadian inflation, and Australian employment.
Britain’s consumer price index data put headline inflation at 0.7% in October, a six-month high but still way off the 2% target that it has not seen since last summer. The Eurozone CPI reading this morning is forecast to be unchanged at -0.3%. Canada is pencilled in for 0.4% inflation in October, a tick lower on the month.
The data tonight from Australia cover new home sales and employment. Although analysts find it difficult to predict the employment numbers, the consensus is that 30k jobs were lost in October as unemployment increased from 6.9% to 7.2%.