Patience is the word

4 minute read


It is a week now since Fed chairman first spoke of the need for "patience" in adjusting monetary policy. Since then it has become the Word of the Year. Jerome Powell said yesterday that he would be "watching and waiting" in coming months because "with inflation low and under control, we have the ability to be patient and watch patiently and carefully". Investors were expecting to hear something along those lines from the chairman and there was little immediate reaction.

There was less evidence of patience at the White House, where the president spoke once again of declaring a national emergency to secure funding for his Mexican Wall. Investors are less concerned with that than they are about the possible effect on the economy of a protracted government shutdown. Economists reckon it could cut a quarter of a percentage point off first quarter growth. The USD hung in there though, on average roughly unchanged against the other majors.


An ultra-low-profile day on the economic front brought no pan-Euroland statistics to the table. The two nation ecostats that came out did nothing to improve the mood. Industrial output in Spain was down by 2.6% on the year and in Italy it fell by an annual 2.6%. The accounts (don't call them minutes) of the European Central Bank's last policy meeting revealed nothing new either, though one of the Governing Council members had something to say on the matter. Banque de France governor Francois Villeroy de Galhau said the ECB should wait until spring before making any change to policy; "We need to keep our options open faced with uncertainty". 

The EUR was left with nothing to do and nowhere to go. It was unchanged against the USD.


Canadian building permits went up by 2.6% in November and the New Housing Price Index was unchanged on the year. No other Canadian data appeared. Nothing there for the Loonie, then, but oil continued to work its magic on the CAD. WTI was up by another 2.7% at $53, 18% above its level on New Year's Eve.

That was good enough for the Loonie. It strengthened by 0.3% against the USD, putting it 3.5% ahead for the year to date.


As the Brexit debate rolled on in Parliament the prime minister was doing her best to build cross-party support for the withdrawal bill, which goes to a vote next Tuesday. A surprise recruit was Japanese premier Shinzo Abe. He appeared next to Theresa May pledging "total support" for her deal, and going on to say "we truly hope that a no-deal Brexit will be avoided, and in fact that is the whole wish of the whole world".

The UK economic data which appeared this morning were mostly unhelpful to the GBP. Manufacturing production was down by 1.1% in the year to November and the broader industrial production fell 1.5%. For November alone the declines were 0.3% and 0.4% respectively. The trade deficit for goods widened by 1.3% while the total deficit narrowed by 12%. Gross domestic product expanded by 0.2% in November, beating analysts' forecasts. That last figure probably saved sterling's bacon. The GBP firmed after the news, leaving it practically unchanged on the day.


Having shared the lead on Wednesday the JPY put in only a mediocre performance yesterday, losing 0.2% to the USD. 

The government's Eco Watchers Survey (that's economy not ecology) results were disappointing. The reading for the current situation was three points lower on the month at 48.0 while the outlook fell by four points to 48.5. The numbers are not closely followed by investors and did not affect the JPY.

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