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How to train your central bank

A hint of jealousy?

If the US president wants a weaker dollar and lower interest rates he might take a leaf out of the book of fellow autocrat, Turkey's Recep Tayyip Erdoğan. At the weekend Erdoğan fired his central bank governor and replaced him with Murat Uysal. The lira gapped 2% lower when it opened this morning.

There is a world of difference between Turkey's 24% benchmark interest rate and America's 2.25-2.5% Federal Funds. However, there is also a big gap between Turkey's 15.72% inflation rate and the States' 1.8% (new data are due on Thursday). Nevertheless, Erdoğan's logic is that high interest rates are inflationary, so he has installed Murat Uysal as central bank governor. "Uysal" translates into English as "compliant".

Were Trump to pull the same stunt with Federal Reserve chairman Jerome Powell - as he has openly contemplated - he would get the weaker currency he desires but only at the cost of reduced confidence and, most probably, lower share prices.  

Good jobs

Friday's US employment report showed nonfarm payrolls rising 224k in June. Including revisions to earlier months there were 53k more people in work that analysts had forecast. The US dollar strengthened. It is half a cent firmer against sterling and the top-performer among the majors currencies.

The strong jobs number has led some to speculate that the Federal Open Market Committee might think twice about lowering interest rates when it meets at the end of this month. However, June's overshoot no more than cancels out the unexpectedly low number in May. This year's average 172k monthly increase is well short of last year's 221k.

Friday's other employment report, from Canada, was less punchy. Rather than the expected 10.0k increase in payrolls, 2.2k jobs disappeared. Even so, the Loonie was kept aloft by the US data and took second place with a half-cent gain over sterling. The pound took some flak on Friday morning from the Halifax house price index, which was 0.3% lower in June. It survived though, and is almost unchanged against the euro, franc and yen.

Europe

The weekend's general election in Greece replaced Alexis Tsipras and the faux-radical Syriza with Kyriakos Mitsotakis and New Democracy, a conventional centre-right party. There was no immediate knock-on benefit for the euro but the result does dial down the Club-Med risk to the single currency.

If anything, it is stodgy old Northern Europe that is posing the economic problems at the moment. Germany did little to mitigate that headache this morning with its trade and output data. The trade figures were respectable enough, with exports up and imports down in May. Output did not look great though, down by an annual 3.7%.

There is not much else on today's card. Euro zone investor confidence comes out this morning and that is the lot until the BRC's UK retail sales number at midnight.  

GBP: Ignores lower house prices

GBP: Ignores lower house prices

TRY: Non-compliant central bank head fired

TRY: Non-compliant central bank head fired

USD: Strong employment data

USD: Strong employment data

CAD: Survives disappointing jobs numbers

CAD: Survives disappointing jobs numbers

EUR: Regime change in Greece

EUR: Regime change in Greece

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