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Daily Brief

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Another win for sterling

It's all about the delay

Sterling did it again yesterday, comfortably maintaining its position at the top of the class. Not only is it the best performer on the day, it also leads over the week, the month and the year to date.  

As ever, it was a Brexit story that did the work. On this occasion it was a report in the Evening Standard newspaper that catalysed the move. It said the EU "does not want a short delay… it would prefer 21 months, which would mean no future relationship talks until the start of 2021". It does not take a conspiracy theorist to conclude that the EU reckons that a long enough delay could derail Brexit altogether, an outcome still devoutly preferred by Europe.

The success of a motion in parliament to reinforce the prime minister's concession of a possible postponement of B-Day did not add much to the mix. A separate motion, to guarantee that Britain would remain in the EU if no deal could be agreed, was defeated. Even so, the postponement story was worth an average of 0.6% to the pound. It took half a cent each off the euro and the US dollar.

No deal with North Korea or China

The US president's meeting with North Korea's Kim Jong Un was cut short this morning when Trump walked away from the talks. "It was about the sanctions," he said at a news conference. "They wanted the sanctions lifted in their entirety and we couldn't do that."

The news sent Asian equity markets lower and the safe-haven yen found buyers. Beyond that knee-jerk reaction, the effect of the breakdown in talks ought not to extend to other world markets. Investors are far more concerned with the progress of trade negotiations between China and the States.

In testimony to the House Ways and Means Committee the administration's trade advisor, Robert Lighthizer, played down trade expectations. He said "[Trump's] instructions to me are: You have to get a great agreement. If we have no agreement, we'll just wait until we can get a great agreement." He did not make it sound as though he was about to land a great agreement. The dollar moved a little higher on the news, strengthening by an average of 0.2% on the day.

Data overload

The coming two days bring a host of economic statistics, including several of high importance to investors. Unusually, the US employment report will not be appearing on the first of the month: it is scheduled for next Friday.

Wednesday's data from Canada put headline inflation at 1.4%, a little lower than forecast. The Loonie thought about it for a while then went into retreat for a daily loss of two thirds of a cent. Revisions to US durable goods orders showed them rising by 1.2% in December.

On today's list the highlights are Swiss GDP - already out, and up by 0.2% in the fourth quarter - German inflation and US GDP. Tomorrow come UK mortgage approvals, Euroland inflation, US retail sales, Canadian GDP and a raft of purchasing managers' index readings. 

GBP tops the list as investors applaud Brexit delay

GBP tops the list as investors applaud Brexit delay

JPY makes late gains after Trump/Kim talks collapse

JPY makes late gains after Trump/Kim talks collapse

CAD slightly hurt by lower inflation

CAD slightly hurt by lower inflation

EUR steady against the USD

EUR steady against the USD

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