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Daily Brief

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Winding down

Few surprises for sterling

Sterling regained its composure on Friday after a tough week that saw it end up 2.9% lower on average. The passage of the Prime Minister's Brexit withdrawal bill through the Commons with a three-digit majority was a formality that had no effect on the currency.

The details of the Brexit bill held nothing to reassure investors about the eventual shape of Brexit. Rather, it drove home the reality that Johnson's 80-seat majority in the Commons gives him the ability to do whatever he likes. That being the case, and given Downing Street' intention to carry on the trade negotiations behind closed doors without parliamentary scrutiny, commentary from Johnson in the coming 12 months could be an important driver for sterling.

UK economic data and events at the end of last week were vaguely interesting and of low impact. November's retail sales were much softer than expected; a 0.6% monthly fall instead of the forecast 0.3% increase. Public sector borrowing was appreciably less than expected in the same month. The upward revision to third quarter growth from 0.3% to 0.4% came as a pleasant surprise. There were no raised eyebrows when the Bank of England's Monetary Policy Committee voted 7-2 to keep the bank rate unchanged at 0.75%.

Sales: Disappointing all round

It was not only Britain's retailers who struggled. Canadian wholesalers, US estate agents and Canadian shopkeepers all reported falling business. It was a similar story for Japanese companies as a whole in October.

Canadian wholesale sales fell 1.1% in October and retail sales were down by 1.2% in the same month. Both numbers were well adrift from their relatively optimistic forecasts of -0.1% and +0.5%. US pending home sales fell 1.7% in October after increasing for two months. The weak Canadian retail sales figures knocked the Loonie back briefly, as they coincided with confirmation that the US economy grew by an annualised 2.1% (quarterly 0.5%) in the third quarter.

A sprinkling of other data along the way found NZ and UK consumer confidence improving and Japanese inflation jumping from 0.2% to 0.5%. This morning the Reserve Bank of Australia reported that private sector lending had fallen slightly in November.

A quiet week

For the obvious reason, financial market activity is likely to be muted this week. Much of Europe - including Germany - will have a two-day official break and plenty of market participants will be taking the other three days off to make it a full week.

US durable goods orders and new home sales come out today. The Richmond Fed publishes its manufacturing index tomorrow. There is nothing of any importance on Wednesday or Thursday, and on Friday the hottest topics will be Japanese and Swedish retail sales.

With that in mind, there'll be no need to worry that the festive turkey will distract you from any momentous events in the FX market. Merry Christmas!

GBP: Stabilises after five days of retreat

GBP: Stabilises after five days of retreat

CAD: Wholesale and retail sales fall

CAD: Wholesale and retail sales fall

USD: GDP grows 0.5% in Q3

USD: GDP grows 0.5% in Q3

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