Snatched from the jaws of defeat

3 minute read


It was a case of half-and-half with the US economic data. Consumer confidence and pending home sales beat analysts' forecasts; house prices and the Chicago PMI missed the mark. The Conference Board's consumer confidence index was five points higher in April at 129.2, beating expectations by two and a half points. Pending home sales were up by 3.8% in March, more than three times the forecast increase. House prices were up too, by 3.0% in the year to February, but analysts had said they would be 3.2% higher. The biggest miss was the Chicago purchasing managers' index. Instead of improving slightly to 59.0 it dropped six points to 52.6.

The wild card on Tuesday was the president. Once again he insisted that the Federal Reserve should cut interest rates, saying the economy could "go up like a rocket" if the funds rate were to be reduced by a full percentage point. The Federal Open Market Committee will either have chuckled or chafed at his verbal intervention but it is likely to leave rates unchanged in this morning's announcement. 


The more upbeat - or at least less downbeat - euro zone data reported yesterday continued to support the EUR through the New York session and overnight. It is 0.2% higher against the USD.

There will be little to be heard from Euroland today. Labor Day holidays in Germany, France and much of the rest of continental Europe mean a complete lack of economic data.


Oil prices fell 0.6% and there were no Canadian ecostats to support the CAD. Yet the Loonie strengthened by 0.5% against the USD.

Its long suit was the governor of the Bank of Canada, Stephen Poloz. In a hearing at the House of Commons Finance Committee the governor expressed optimism that "there is good reason to believe that the economy will accelerate in the second half of this year". Investors figured that his optimism was not an obvious pointer to lower interest rates.


Sterling scooped the pool on Tuesday, strengthening by an average of 0.6%. It is 0.7% higher against the USD. Some of that is the result of this morning's UK data, which put house prices 0.4% higher on the month and delivered a manufacturing PMI slightly higher than expected at 53.1.

Most of the gain, however, came from fuzzy Brexit optimism and technical factors. Sterling's breakout from a short-term downtrend against the USD translated in to a broad wave of support across the board. It was "justified" by the possibility of a Brexit agreement between the two main parliamentary parties and by Labour's willingness to keep a second referendum on the table. Although both looked more than a little tenuous, investors were willing to go with the flow.


Emperor Naruhito was enthroned this morning on the third day of the long Japanese vacation. His reign will be known as the era of Reiwa, beautiful harmony. It is a worthy aspiration.

There were no Japanese economic news or data. The JPY is unchanged on the day.

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