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Alternative arrangements

It's victory Jim, but not as we know it

To watch last night's parliamentary votes was fascinating in more ways than one. First, with each amendment's defeat by the government, sterling ticked lower. Second, it was clear from sterling's movement what every result was going to be, even before the tellers lined up to announce it. 

Sterling does not need too many government victories like that. It is in last place for the day, down by an average of 0.6% against the other major currencies with losses of two thirds of a cent to the euro and the US dollar. 

There are a couple of reasons why investors are less than enthusiastic. For one thing, the prospect of a no-deal Brexit is still real. Although MPs supported the Spellman/Dromey amendment which rejected no deal, it was more of a plea than an instruction to the government. Another problem for investors is that the Brady amendment, which parliament did approve, proposes to replace the reviled "Irish backstop" with unquantified "alternative arrangements". Although the EU has said it would consider alternative arrangements nobody has a clue what they might look like. In their absence, the concern is that the government will find itself in the self-same position a fortnight from now.

Iron ore inflation

The Australian dollar was top among the major currencies, strengthening by a cent and two thirds against sterling, almost 1%. There were two strings to its bow, higher iron ore prices and the Australian inflation data.

Following the fatal collapse of a dam in Brazil, miner Vale is cutting back production at its facilities with similar structures. The news pushed up the price of iron ore, one of Australia's key exports. Even more help for the Aussie came from the quarterly inflation data. The headline rate was slightly ahead of forecast at 1.8%.

Other data in the last 24 hours showed a softening of US consumer confidence and stronger than expected Japanese retail sales. Neither had a direct currency impact: the yen is 0.5% ahead on the day, roughly in line with the US dollar and the euro.

Patience

The Federal Open Market Committee is widely expected to keep its benchmark interest rate unchanged at today's meeting. The important question is how long this pause will last. Perhaps Chairman Jerome Powell will offer some guidance at his press conference.

Since the beginning of the year Federal Reserve bosses have been banging the drum for "patience" in monetary policy adjustments. It is unthinkable that they would surprise the market with an increase today, not least because the government shutdown is starving them of the economic data necessary for decision-making.

There are no other hugely important events or ecostats on today's list. The European Council reports on business and consumer confidence and there is a sprinkling of national inflation and confidence readings from around Euroland. ADP's employment change number will provide a pointer to Friday's US employment figures (which are apparently unaffected by the shutdown). The Bank of England's mortgage and credit numbers are unlikely to move sterling. 

GBP lower across the board after Commons votes

GBP lower across the board after Commons votes

AUD leads, helped by inflation and iron ore prices

AUD leads, helped by inflation and iron ore prices

JPY unaffected by stronger retail sales

JPY unaffected by stronger retail sales

USD awaits expected no-change Fed rate decision

USD awaits expected no-change Fed rate decision

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