Daily Brief
Brexit news buoys sentiment
3 minute readUSD
Investors were in a buoyant mood on Wednesday. Equity prices and other risky assets tended higher and safe-havens were out of favour. The USD struggled in the back half of the field, falling by 0.4% against the EUR. The economic data from the States did not add much to the debate. ADP's employment change was stronger than expected, rising 227k in October; the Bureau of Labor Statistics' employment cost index went up by 0.8% in the third quarter, also more than predicted; the Chicago purchasing managers' index missed the mark, unexpectedly falling two points to 58.4.
EUR
During the New York session and overnight the EUR struggled to hold its own. Early this morning, however, it moved ahead. Its progress had a lot to do with improved sentiment surrounding Britain's departure from the European Union, which had a positive knock-on effect across the board. An on-target 2.2% inflation reading from the euro zone did nothing to help the currency and investors paid little attention to an unchanged 8.1% rate of unemployment. Several countries in Europe have a All Saints' Day holiday today so no Euroland statistics appear on the agenda.
CAD
The Loonie edged ahead of the USD by 0.2%, despite lower oil prices. The upward move came during this morning's London session, suggesting that it was driven more by risk-on sentiment than by any Canada-specific development. Domestic data showed industrial product prices rising 0.1% in September while raw material prices were down by 0.9%. Gross domestic product expanded by 0.1% in August, have been forecast to remain unchanged.
GBP
After a shocking day on Tuesday sterling enjoyed a miraculous recovery, leading the major currency field and strengthening by 1.0% against the USD. Where Tuesday's losses were the result of negative Brexit news, Wednesday's gains were sparked by positive stories. A survey by HSBC found companies optimistic about post-Brexit international trade. The Times of London reported that the prime minister had reached an agreement with the EU to allow British banks continued access to the euro zone market. Data released this morning showed house prices stalling in October while the manufacturing purchasing managers' index fell nearly four points to 51.1.
JPY
The yen crept 0.2% higher against the USD as both currencies were left behind in a shift from safety to risk. Most of the action took place during the morning session in New York: there has been little movement overnight. The only Japanese data related to international capital flows: foreign investment in Japanese stocks fell ¥349bn in October while foreign bond investment was down by ¥1.079bn.