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Not buying it

Frictionful trade threat

Events conspired against sterling on Friday, sending it to the back of the field with an average fall of 0.4%. Its biggest losses were four fifths of a US cents and almost one Japanese yen. Investors now see a 70% chance of a rate cut by the Bank of England next week.

UK retail sales in the fourth quarter fell 1.0% compared with the three months to September and December's sales were 0.6% down from November. It was the fifth month of zero or negative growth, the longest period of decline since records began in 1957.  There were no redeeming features, especially as analysts had predicted a retail rebound in December. "Uncertainty linked to Brexit and the general election were major causes of the weak retail sales, according to economists, despite improved household finances."

The uncertainty was fed by the Chancellor of the Exchequer. In an interview with the FT, Sajid Javid "quashed any prospect of the Treasury lending its support to… alignment with EU regulations." One industry body saw his stance as "the death knell for frictionless trade" but an ex-member of the Monetary Policy Committee thought he was bluffing: "Andrew Sentence described Javid and the government's new position as 'more nonsense', adding: 'Of course we need a high degree of alignment with our closest trading partners."

Other central banks

The European Central Bank and the US Federal Reserve were also making news. With the Fed it was two board nominations put forward by the US President; with the ECB it was the Governing Council meeting accounts and speculation about the future shape of monetary policy.

On Thursday ECB President Christine Lagarde is expected to announce a review of the bank's monetary policy strategy. It is likely to cover inflation expectations and targets as well as climate change and inequality.

In the States the president intends to nominate Judy Shelton and Christopher Waller to serve on the Federal Reserve Board.  Mr Waller, the executive vice president of the St Louis Fed, is an uncontroversial pick. Ms Shelton, however, is anything but: she advocates a return to the gold standard that had to be abandoned as unworkable in 1976.

House prices higher

Retail sales might be flagging but home-sellers are optimistic that Brexit and a new government will mean more money in their pockets. Rightmove's index of asking prices is 2.3% higher on the month, the biggest increase in the index's 18-year history.

The Rightmove index is not quite the only ecostats on today's agenda but the rest of them have already come and gone. Japanese industrial production fell 1.0% in November and was down by 8.2% on the year. German producer prices rose 0.1% in December for a 0.2% annual decline.  And that is the lot for the London session.

Tonight the Bank of Japan makes a monetary policy announcement. No change is expected.

GBP: Hit by retail sales and Brexit threat

GBP: Hit by retail sales and Brexit threat

EUR: Central bank policy review in prospect

EUR: Central bank policy review in prospect

USD: Gold advocate nominated for Fed board

USD: Gold advocate nominated for Fed board

JPY: No change expected to BoJ policy

JPY: No change expected to BoJ policy

USD: Top performer

USD: Top performer

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