Daily Brief

Daily Brief

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Kiwi steals gold

No-deal risk fades

The efforts continue in Westminster to prevent a no-deal departure and investors are appreciative.

Sterling missed out on gold yesterday only because the NZ dollar had an even better day. The pound gained an average of 0.6%, adding half a euro cent, three quarters of a US cent and one Japanese yen. It is up by an average of 1.4% on the week and 1.8% on the month, and all because the market believes that Parliament will prevent Britain's departure from the EU without a deal.

A move in Westminster to delay the 29 March departure date looks closer to success now that it has the support of the opposition Labour party. Shadow chancellor John McDonnell said in a TV interview that no-deal has "potentially quite catastrophic consequences [and] I think there's a majority in Parliament for avoiding no deal".

Good news on jobs

The other plank in sterling's rally yesterday was a strong set of employment data. Unemployment fell to 4.0%, a 43-year low, and more people were in work than ever before.  

Even more important to investors was the upward progress of wages. Basic pay was up by 3.3% on the year and total earnings, including bonuses, were 3.4% higher. It represents a real increase in earnings after 2.1% inflation is taken into account.

Other data on Tuesday showed a slight erosion of investor confidence in Germany while in the euro zone as a whole it was roughly unchanged. Canadian manufacturing shipments and wholesale sales both fell in November, knocking the Loonie back for a daily loss of one and a fifth cents. US existing home sales were down by a monthly 6.4%; the news did the US dollar no harm.

Kiwi flies

The NZ dollar was the top performer, strengthening by half a cent against sterling. Its gains were due entirely to the NZ consumer price index data. Inflation held steady at 1.9% in the fourth quarter of 2018, beating expectations that it would slow to 1.8%.

Japan reported the biggest decline for exports in more than two years. In December they were down by 3.8% on the year, thanks to weak global demand and the US trade war. The yen is 0.8% lower on the day, hurt also by the Bank of Japan's admission that it is fighting a losing battle with low inflation. The bank again cut its inflation forecast, now projecting rates of 0.6% and 1.0% for this year and 2020.

Today's statistical highlights are the CBI's Industrial Trends Survey and Canadian retail sales. Australia reports on employment tonight.  

The US government shutdown continues to obstruct publication of several key statistics. Among those missing in action are the balance of trade, building permits, construction spending, factory orders, housing starts, cross-border investment flows and retail sales. 

GBP higher again on Brexit outlook

GBP higher again on Brexit outlook

NZD wins the day after inflation beats forecast

NZD wins the day after inflation beats forecast

JPY lower on trade and BoJ inflation projections

JPY lower on trade and BoJ inflation projections

CAD softer as orders and sales decline

CAD softer as orders and sales decline

AUD awaits employment data tonight

AUD awaits employment data tonight

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