Daily Brief

Daily Brief

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Trade worries wax and wane

Rolling back the tariffs

Concern increased on Wednesday that the on-again-off-again trade talks between Washington and Beijing had hit another snag. In the absence of any other obviously-tradable news, the tilt was away from risk and towards the safe-havens. That tilt was reversed once again just ahead of London's opening.

Following Tuesday's reports that China would not sign a "phase one" trade deal until Washington removed its most recent tariffs, there were more signs that an official agreement was not imminent. A senior Trump official told Reuters that a Trump/Xi meeting could be delayed until December, not least because they could not agree on a venue. Investors had by no means written off the possibility of a deal but felt obliged to react to developments as they occurred, and this one pointed towards risk-off.

The yen came out of it best, strengthening by a third of a yen against the US dollar and four fifths of a yen against sterling. The antipodean dollars fell to the rear, losing a fifth of a cent to sterling in the penultimate slot. This morning it was all-change: the yen dropped back and the antipodeans got a boost from a story that China and the States have agreed to "roll back tariffs in phases".

Unremarkable data

Economic data from the euro zone were vaguely reassuring, in that most of them came in ahead of analysts' predictions. Canada's numbers were unhelpful to the Loonie and the US data provided investors with nothing to chew on.

The delayed services sector purchasing managers' indices from Euroland were all in the growth zone above 50, and the composite reading for the zone as a whole was also positive at 50.6. Retail sales increased, as expected, by 0.1% in September for a 3.1% annual rise. 

Investors were not really interested in the 0.3% quarterly fall in US nonfarm productivity, nor the 3.6% rise in unit labour costs. They did not much care for Canada's below-forecast Ivey PMI, so the Loonie fared no better than the euro and could only inch ahead of sterling. 

Bank in a bind

Ecostats are quite plentiful between now and the weekend. The numbers are mostly not particularly important ones though. Today's highlights are the Bank of England's policy decision and the quarterly Inflation Report. Friday's will be the Reserve Bank of Australia's Monetary Policy Statement and the Canadian employment data.

No change is expected to sterling interest rates at midday, and the vote is expected to be unanimous. The BoE's inflation report is less predictable: it will be interesting to see how the governor squirms round the bank's inability to make reliable forecasts as a result of Brexit and political uncertainty. The other forecasts due today are those for economic growth from the European Commission.

Friday brings a job lot of miscellaneous data for European and North American jobs, trade, housing and confidence. The two to watch are Canadian employment and the provisional Michigan index of US consumer sentiment.     

GBP: Fades gently on political uncertainty

GBP: Fades gently on political uncertainty

JPY: Gains, then losses, as trade narrative shifts

JPY: Gains, then losses, as trade narrative shifts

AUD: Losses, then gains, as trade narrative shifts

AUD: Losses, then gains, as trade narrative shifts

USD: Set back by tariff news

USD: Set back by tariff news

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