Sterling steals the win
It was all a bit muddled in the States on Tuesday, what with the Chinese coronavirus crossing the Pacific, the US President planting a trillion trees and the Democrats in Congress doing their best to stop him in his tracks. Sterling took advantage of the situation, sneaking into the lead with an average 0.5% gain.
By far the biggest factor in sterling's success was the UK employment and earnings numbers. There had been more than one statistical disappointment last week and several dovish comments from Bank of England policy-setters. Because of that, investors had become fairly sure that next week's Monetary Policy Committee meeting would deliver a rate cut. All they needed yesterday was a poor set of jobs data to ensure that the MPC would do the necessary. It did not happen.
Instead, employment - the number of people in work - touched a record high, unemployment remained low at 3.8% and annual earnings growth held up at 3.2% including bonuses and 3.4% for basic wages. The pound reacted positively, adding half a US cent in fairly short order. It also picked up half a euro cent, two thirds of a Swiss cent and two thirds of a yen.
Sterling was the only real game in town. The Swedish krona was 0.2% behind in second place and the Norwegian krone was out at the back with a 0.8% loss: The rest of the field - the USD, EUR, CHF, JPY, CAD, AUD and NZD were closely grouped in the middle of the field.
That tight grouping was primarily because there was nothing to distinguish the main protagonists from one another. Economic data were thin on the ground and nothing of any real consequence emerged from the 119 billionaires and 53 heads of state at the World Economic Forum in Davos. The US President spoke for half an hour about his many achievements, while studiously avoiding or dismissing the conference's hot topic.
The few data showed further improvements in German and Euroland economic sentiment, vaguely disappointing Canadian manufacturing sales and decently strong NZ dairy prices.
Canadian rates, Australian jobs
The headlines during today's London session will focus on Canadian inflation and the Bank of Canada's rate decisions. Tonight the spotlight will be on the often-capricious Australian employment data. Britain reports on public sector borrowing and manufacturing orders.
Australia opened the batting with a decline in consumer confidence that was not as severe as it might have been in light of the devastating bushfires. South African inflation came in as expected at 4.0%. Euro zone data this morning are limited to Italian industrial orders and sales. From the States come the Chicago Fed's national activity index, house prices and existing home sales. Canadian inflation, house prices and wholesale sales are followed by the Bank of Canada's interest rate decision, where no change is expected.
Tonight brings the Australian employment report. Some 15k new jobs are predicted for December, less than half November's increase, and unemployment is projected to be steady at 5.2%.