USD

Things did not go well for the USD on Wednesday. Its principal handicap was the Federal Reserve but the president did nothing to lighten the mood when he stormed out of a discussion about the government shutdown. The presidents of four regional Federal Reserve Banks all, in their different ways, indicated a need for caution in tightening monetary policy. Chicago's Charles Evans, a leading policy hawk, still looks for three rate hikes this year but conceded that "we have good capacity to wait and carefully take stock" before pushing higher. Later, the minutes of the Federal Open Market Committee showed several members believing that the committee "could afford to be patient" in making its next move.

The effect of all that patience and caution was to knock the USD down through technical support. It was the back marker among the major currencies.

EUR

The euro did nothing to distinguish itself. French industrial production fell by 1.3% in November, Italian retail sales increased by 0.7% and that was it as far as the economic data were concerned. This morning the Ford motor company said it will cut "thousands" of jobs in an effort to make its European operations profitable. 

Nevertheless, the EUR vied for the lead with the JPY. Its gains were almost entirely a by-product of the USD's decline. The EUR is the default choice for sellers of the USD because the market is so liquid. It strengthened by a net 0.6% on the day, having at one point been up by almost 1%.

CAD

In a way, the Bank of Canada met investors' expectations with its interest rate decision and rate statement. The target for the overnight rate remained at 1.75% and the statement noted that "the policy interest rate will need to rise over time into a neutral range". However, it was the "over time" bit that drew investors' fire, as well as the myriad ifs and buts scattered throughout the statement. The BoC gave the distinct impression that, where only recently it appeared to be on the warpath, it now intends to sit on its hands for a while and see what happens. 

A further 1.8% rise in oil prices did much to offset disappointment about the dovish BoC and the CAD was unchanged on the day. 

GBP

Another day, another government defeat in the House of Commons. The one yesterday related to the rule which had given the prime minister 21 days to come up with a new plan if her EU withdrawal bill were to be defeated next Tuesday. The 21 days have been slashed to three, the aim being to prevent the PM "running the clock down" to leave Parliament with a binary choice between her deal and no deal.

Investors were not entirely delighted by the vote. They would prefer to see Parliament sign up for Theresa May's deal because it would provide certainty. What they anticipate now is more weeks of fruitless debate, with no knowable outcome. Sterling did manage to edge ahead of the USD by 0.1% but that was entirely down to the dollar's even greater weakness.

JPY

Like the EUR, the JPY gained ground by default, not because of any intrinsic qualities. Investors were not particularly seeking a safe-haven, they just wanted out of the USD. The Japanese economic data were of no help: the coincident index was two points lower at a provisional 103.0 in November and the leading index was a third of a point lower at 99.3.

Nevertheless, the JPY took first place for the day. It went up by 0.8% against the USD.