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Patiently awaiting greater clarity

If this is it

It is nearly a month since the Federal Reserve chairman first mentioned "patience" in the context of monetary policy. So it cannot have come as a surprise when he spoke of it again yesterday. But he said it so patiently that investors sensed something was up.

The chairman and the FOMC covered just about all the bases with their statements and press conference. In the rate statement was confirmation that "the Committee will be patient as it determines… future adjustments". The accompanying statement about balance sheet normalisation discussed the procedure of running down the stock of bonds acquired by the Fed during its QE programme. It implied that it would not use the process as a covert way of tightening policy.

As for the press conference, Mr Powell's tone was unabashedly dovish, to the extent the New York Times summarised the situation as "Federal Reserve Signals End Of Rate Hikes". Investors got the same message. They marked down the dollar by three quarters of a cent almost immediately. It was Wednesday's biggest loser, down by an average of 0.5% against the other majors and a net third of a cent lower against the pound.

Open and frank

The Guardian newspaper reports that Prime Minister Theresa May had an "open and frank" phone conversation with EU president Donald Tusk yesterday. It is possible that Mr Tusk and his colleagues are a little frustrated with the latest expression of parliamentary solipsism.

Investors are certainly frustrated. They had been hoping for an outbreak of reality on Tuesday evening in the Commons and what they got instead was another unicorn story. Except against the US dollar and the Swiss franc, sterling moved lower again yesterday, losing an average of 0.3% to the major currencies. Better-than-expected UK lending and mortgage data and an unchanged reading for consumer confidence had no effect upon it whatsoever.

Overnight data from the Far East were mixed. Japanese industrial production in December was 1.9% down from the same month in 2017. In China, the CFLP services sector purchasing managers' index improved by a point to 54.7 while the NBS manufacturing PMI remained in the shrinkage zone at 49.5. 

Numerous numbers

A tide of statistics today and tomorrow will cover everything from Australian producer prices to US unemployment. The most closely-watched figures will be today's fourth quarter gross domestic product from Euroland and tomorrow's monthly change in nonfarm payrolls from the States.

Analysts reckon that euro zone growth in Q4 2018 will be a provisional 0.2%, unchanged from Q3. Spain did rather better than that: this morning's estimate put Q4 growth at 0.7%. Italy will be next to report, and 0.3% growth is pencilled in. 

Friday brings the monthly round of purchasing managers' index readings, mostly from the manufacturing sector. Investors have been told to expect more declines than improvements. US nonfarm payrolls are forecast to have increased by 165k in January, considerably fewer than the 220k average monthly rise in 2018. 

GBP lower again following government's Brexit victory

GBP lower again following government's Brexit victory

CHF flat against sterling

CHF flat against sterling

USD the back marker after show of Fed dovishness

USD the back marker after show of Fed dovishness

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