Daily Brief

Daily Brief

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The status quo

More of the same

An unexpected general election win for incumbent Scott Morrison's Liberal-National coalition in Australia and a less surprising victory for prime minister Narendra Modi's Bharatiya Janata Party (BJP) in India sent the Aussie and the rupee higher at today's opening. Sterling had a fifth successive rotten day, narrowly avoiding a running flush of wooden spoons.

The world's biggest democratic election involved 900 million people electing 543 MPs (107 fewer than Britain's House of Commons!). Exit polls point to another five years in power for Mr Modi and the rupee is 1.3% higher on the day.  

Following another example of wayward groupthink among the opinion pollsters, Scott Morrison is within reach of an overall majority for his coalition. Because investors prefer the Lib-Nat economic philosophy to that of Labour, and because they did not expect this result, the Aussie is up by 1.0%, having come last or joint-last among the major currencies on five of the previous seven days.

Tedious though it is to report, sterling's miserable showing provided further evidence that investors distrust the government's ability to organise drinks in a brewery, let alone steer the country to a safe place beyond Brexit. They were less than convinced by Theresa May's promise of a "bold offer" that will "win new support". Sterling is down by an average of 0.3% on the day and 1.6% down from last Monday's levels.

No statistical shocks

The ecostats on Thursday and Friday created no major ripples. Euroland inflation was unchanged at 1.7%. US consumer confidence was stronger than expected with the Michigan index of sentiment improving by five points to a provisional 102.4.

Thursday's data included a widening of Euroland's trade surplus, a 5.7% jump in housing starts and a 0.6% rise in building permits. A strong 2.1% increase in Canadian manufacturing shipments counted for little, perhaps because of trade concerns.

On Friday Business NZ's purchasing managers' index was a point higher on the month but still below forecast at 53.0. While headline euro zone inflation was steady at 1.7%, core inflation ticked up from 1.2% to 1.3%.

Growth in Japan

The first ecostats of this week showed Japanese gross domestic product expanding by a provisional 0.5% in the first quarter. The figure was well ahead of the forecast 0.0% growth. Monthly and annual declines of 0.6% and 4.3% for industrial output rather spoiled the overall impression.

True to form, the Japanese yen showed no emotion when the GDP and production data appeared. Although it is in joint penultimate position for the day alongside sterling, the yen's decline came on Friday afternoon, not this morning.  

A very brief loss today includes German producer prices, Euroland current account and the Chicago Fed's national activity index. The Reserve Bank of Australia minutes come out tonight. The Bank of England's Ben Broadbent will be speaking this afternoon, as will the chairman and vice chairman of the US Federal Reserve.

GBP: Narrowly avoids another wooden spoon

GBP: Narrowly avoids another wooden spoon

INR: Higher after Modi wins another term

INR: Higher after Modi wins another term

AUD: Top performer on surprise Lib-Nat win

AUD: Top performer on surprise Lib-Nat win

JPY: No reaction to unexpected Q1 expansion

JPY: No reaction to unexpected Q1 expansion

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