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Third time is not a charm

Commons vote 

Theresa May's government was defeated in three Commons divisions yesterday. Sterling is half a cent lower on the day against the US dollar but, perhaps surprisingly, it is fractionally ahead, on average, against the other major currencies. This is, to say the least, unusual.

Two of the votes related to the publication of legal advice regarding the Brexit deal. The third, and arguably the most important, gives MPs the right to decide what happens if - or when - they reject the prime minister's Brexit deal next Tuesday. Coupled with the European Court of Justice's opinion earlier in the day, that Britain could unilaterally revoke the Article 50 notice of withdrawal from the EU, it makes a no-deal Brexit far less likely.

Although the situation remains plagued by uncertainty, at least the no-deal cliff-edge has been pushed into the long grass and, for that, investors are at least a little grateful. The pound is unchanged, or almost so, against the euro, the Swiss franc, the NZ dollar and the Northern Scandinavian crowns.

Risk off again

As the heat on sterling was turned down, investors found fresh reason for nervousness about the wider world. In particular they experienced a crisis of confidence in the fantastic deal struck by Trump with the Chinese president at the weekend. Their disquiet manifested itself in a 2% decline in US equities and increased demand for the safe-haven Japanese yen.

For the first time in nearly four weeks the yen was the day's top performer, strengthening by 0.5% against sterling and the euro. At the other end of the scale the roller-coaster rand was hardest-hit, having led the way on Monday and taken the wooden spoon on Friday. Its decline came despite forecast-beating gross domestic product data: South Africa's economy expanded by 2.2% in the third quarter.

Among the major currencies it was the Australian dollar that came off worst, losing just over a cent to sterling. For the Aussie it was very definitely the GDP data that caught investors' attention. Third quarter growth of 0.3% was only half of what had been expected and a third of what had been achieved in Q2.

The debate continues

Once again it will be the Brexit debate in the Commons that sets the tone for sterling. The UK services sector purchasing managers' index is the only UK ecostat: it will be accompanied by other services PMIs from around Europe but not from the States, where there is a national holiday in honour of president George HW Bush.

After the UK PMIs for manufacturing and construction beat expectations on Monday and Tuesday, hopes will be high for a hat trick with today's services reading. Among analysts the consensus is for a slight improvement to 52.5.  The European PMIs are all forecast to be unchanged on the month.

This afternoon the Bank of Canada is expected to keep its benchmark interest rate target steady at 1.75%. Tonight Australia reports on retail sales and the balance of trade.

GBP steady as hard Brexit fears fade

GBP steady as hard Brexit fears fade

EUR unchanged against Kiwi and most Europeans

EUR unchanged against Kiwi and most Europeans

JPY leads as investors question growth outlook

JPY leads as investors question growth outlook

ZAR lags despite strong GDP data

ZAR lags despite strong GDP data

AUD hurt by unexpectedly slower Q3 growth

AUD hurt by unexpectedly slower Q3 growth

CAD awaits Bank of Canada rate decision

CAD awaits Bank of Canada rate decision

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