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Waiting for a sign

Euro lower, lira lapses

It was the euro that came off worst on Tuesday, not because of poor economic data but apparently as a result of concern about the resurgence of Covid-19. There is a possibility that Germany will join the growing number of countries returning to some level of lockdown.

The only hard economic data from Europe came from the European Central Bank, in its report on monetary developments in the Eurozone and the October bank lending survey.  The former showed broad money supply M3 growing at an annual 10.4%, its fastest rate in more than 12 years. The latter revealed “tighter lending criteria across all loan categories”. Banks are being more selective about how much they lend and what conditions they apply.

An average daily decline of 0.5% made the EUR the weakest front-line currency, with losses of half a cent each to the USD and GBP. The biggest loss, however, was for the TRY. It lost another 1.4% to the majors, leaving it 27% lower against sterling from the turn of the year.


Buy the mystery

Tuesdays’ joint winners were the Japanese yen and Norwegian krone, hardly natural bedfellows. If safety was the driver for the JPY, why did the equally safe CHF lose ground? And if oil prices were static (WTI crude was down by 7¢ a barrel), why the enthusiasm for the NOK?

Leaving aside the euro, yen and krone, there was little action between the major currencies and minimal net change. The pound was on average unchanged once again, and flat against the US dollar. There were no UK economic data other than the low-profile BRC shop price index early today, which was 1.2% lower on the year.

In the United States durable goods orders rose 1.9% in September with nondefense capital goods excl. aircraft up by 1%. The numbers were stronger than forecast. That was also true of the Case-Shiller house price index, which was 5.2% higher than a year earlier. The Richmond Fed’s manufacturing index also looked good at 29 after improving by eight points to a record high. Consumer confidence headed in the opposite direction, with the Conference Board index half a point lower at 100.9 in September.


Australian inflation, Canadian rates

Consumer price index data from Australia this morning showed inflation rebounding in Q3 as prices went up by a quarterly 1.6%. The annual rate jumped from -0.3% to 0.7%, in line with forecast.

The acceleration in inflation was mainly the result of an end to free child care in most states. Housing costs failed to deliver the expected fall and car pieces surprised with a 2.5% rise. Also ahead of London’s opening, Norway reported a 0.3% monthly rise in retail sales. French consumer confidence was almost unchanged at 94, and in Sweden it was a point and a half higher at 90. Spanish retail sales fell 3.3% in the year to September.

The rest of today’s ecostats are relatively unimportant. Headlining the agenda, the Bank of Canada will reveal this afternoon what changes, if any, it has made to monetary policy. The general expectation is that it will leave its benchmark target for the overnight rate unchanged at 0.25%.

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