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Nothing to worry about

Deal or no deal  2.0

Oil higher, equities higher, safe-haven currencies down: Wednesday bore all the hallmarks of a newly risk-off mood among investors. The outbreak of optimism had much to do with an expectation that Washington and Beijing are close to a trade agreement, an idea fostered by the US treasury secretary.

Secretary Mnuchin told CNBC "We were about 90% of the way there [with a deal] and I think there's a path to complete this". It is not the first time Mr Mnuchin has expressed optimism on trade: two months ago he said talks were "getting into the final laps". This time though things are, as the saying goes, different, at least as far as investors are concerned. They took view on Wednesday that something will be agreed when the Chinese and US presidents meet in Osaka for the G20 summit at the end of this week.

The NZ dollar took first place, closely followed by the Aussie. At the back of the field the yen was narrowly beaten by the Swiss franc, safe-havens being unwanted with the sunlit uplands of a trade deal in sight. In the middle there was nothing to choose between the euro, the US dollar and the pound.

Trump: "insane"

Meanwhile the US president continued his hostility to Federal Reserve chairman Jerome Powell, whom he blames for preventing an even bigger bubble in the stock market. He described US monetary policy as "insane" and said he would rather have [ECB President Mario] Draghi than "our Fed person".

The US data did little either to support or undermine Trump's argument. Wholesale inventories grew by a provisional 0.4% in April. The trade deficit widened to $74.6 billion. Durable goods orders fell by 1.3% in May - more than expected - but nondefense capital goods orders ex-aircraft, arguably the best measure of what is happening in the real economy, beat forecast by rising 0.4%.

In Britain the Bank of England governor told Parliament's Treasury Committee how monetary policy might develop if Britain left the EU without a deal: "It's more likely that we would provide some stimulus in that event". The bank's official line is that following an orderly Brexit, rates could move in either direction, and that decisions will be data-dependent. However, rare is the economist or investor who anticipates a rate increase.

Husting upon husting

The Hunt-Johnson hustings recommence today, with another session tomorrow and two on Saturday. Whilst the two candidates' commitment to a 31 October departure - with or without a deal - is the most serious consideration for sterling, they are also beginning to open up on fiscal policy: rash proposals could affect the pound.  

Economic data ahead of the weekend are mostly low-key. The significant ecostats today are the revised first quarter gross domestic product and personal consumption numbers from the States. Friday's will be Britain's almost-finalised GDP figures for Q1.

As the Hunt-Johnson contest continues, Japan's foreign minister spoke to BBC's Today programme this morning. He said a no-deal Brexit would have "very negative" consequences for Japanese firms in Britain and would make new investment "very difficult". "Difficult" is the polite Japanese code for "no". "Very difficult" means "no way, Sunshine".

GBP: More candidates' debates on the way

GBP: More candidates' debates on the way

USD: Mnuchin optimistic about trade deal

USD: Mnuchin optimistic about trade deal

NZD: Leads AUD as risk-appetite revives

NZD: Leads AUD as risk-appetite revives

JPY: Risk-on mood hurts safe-havens again

JPY: Risk-on mood hurts safe-havens again

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