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Brexit is back

Here we go again

After more than a week of absence the bane that is Brexit returned yesterday to make its presence felt. It turned what might have been fairly good day for sterling into an ordinary one. Losses of 0.4% to the yen and US dollar left it an average of just 0.2% higher.

At lunchtime on Tuesday investors picked up on stories that the cross-party Brexit talks in Westminster were not making progress and that efforts were intensifying in the Conservative party to force Theresa May from office. The news was hardly startling but it was not an auspicious start to the new parliamentary session.

There was an air almost of resignation as investors jumped onto the bandwagon to mark down the pound: "Oh no, here we go again, I suppose I'd better get on with it before everybody else beats me to it." The pound dropped half a US cent and half a yen. Losses elsewhere were more muted. Sterling is unchanged against the Swiss franc and almost so against the euro.

The curse of the quarterly statistic

Although New Zealand is the most egregious purveyor of quarterly - rather than monthly - data, Australia also dabbles in the dark art. This morning it published the consumer price index figures for the first quarter and they cost the Aussie almost one US cent. It lost a cent and a half to sterling.

Analysts had said that prices would have risen 0.2% in Q1, bringing the headline inflation rate down from 1.8% to 1.5%. The Australian Bureau of Statistics had other ideas. It said prices did not budge in Q1, putting headline inflation at 1.3%. The "trimmed mean" measure, which the Reserve Bank of Australia uses in its decision-making process, was down from 1.8% to 1.6%. The news encouraged investors to wonder not if there would be a rate cut by the RBA, but how many there might be.

Tuesday's ecostats from North America were quite encouraging. Canadian wholesale sales went up by 0.3% in February, three times as much as expected. US new home sales jumped 4.5% in March, blowing away the predicted 2.5% decline. The European Commission reported a deterioration in consumer confidence, from -7.2 to -7.9, and nobody noticed.

Bank of Canada

The Bank of Canada's policy announcement and press conference are the theoretical highlights today. It is generally expected that the BoC will leave its benchmark target for the overnight rate unchanged at 1.75%.

In its last policy statement six weeks ago the BoC talked of "increased uncertainty about the timing of future rate increases". There is every chance that today's statement will no longer mention the possibility of an increase. America's Federal Reserve is being "patient" and the BoC is likely to follow suit.

The important numbers from Europe this morning are the three German business confidence measures from IFO and UK public sector borrowing. All are expected to be improvements on the previous month.  

GBP: Brexit spoils its day

GBP: Brexit spoils its day

AUD: Lower inflation points to rate cut

AUD: Lower inflation points to rate cut

USD: Useful jump in new home sales

USD: Useful jump in new home sales

CAD: Bank of Canada tipped to abandon tightening tilt

CAD: Bank of Canada tipped to abandon tightening tilt

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