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Daily Brief

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Europe out of favour

USD  

There was no convincing win for the USD but it did share first place with the Swiss franc. For both currencies it was investors' aversion to the EUR and GBP  that fed their appetite for the USD. There were a few US economic statistics: producer prices were up by 2.9% in the year to October; wholesale inventories increased by a monthly 0.4% in September; the University of Michigan's provisional index of consumer sentiment was lower on the month and above forecast at 98.3. But none of those - nor any other financial or political development - was fascinating enough to justify the USD's rally. Once again it was in demand for what it wasn't, not what it was.

EUR 

Except for a 0.2% monthly fall in Italian industrial output, released this morning, there were no euro zone data on Friday or this morning.  It would be an exaggeration to accuse the Italian statistic of undermining the EUR but it certainly did not help, given the market's preoccupation with the Italian government's intention to spend more than it takes in taxation.  Rome is refusing to submit a budget more to the EU's liking by the Tuesday deadline, though it is said to be considering lowering its growth forecast.  The EUR came only under relatively gentle pressure on Friday but it gapped lower in the Far East this morning and fell sharply as European markets got under way.  It is 0.7% lower on the day against the USD.

CAD  

Though not quite up to speed with the leader, the CAD counted in the top four major currencies, losing just 0.1% to the USD.  Like the USD, the CHF and the JPY, investors saw the Loonie as a safer alternative to the EUR and GBP.  There were no Canadian economic data, however the decision of Saudi Arabia to reduce oil production by 0.5m barrels/day in December gave a lift to oil prices, helping the CAD.

GBP 

Britain's pound shared last place with the ZAR, falling by 1.2% against the USD.  The rot set in on Friday when Jo Johnson, one of Theresa May's cabinet ministers, resigned in protest against her Brexit plan.  Mr Johnson's departure encouraged other parliamentarians - from both sides of the House - to come forward and criticise the plan.  After two weeks of relative optimism about Brexit the narrative has turned negative again and the GBP is under pressure.

JPY  

Friday was uneventful for the JPY. There was a flurry of excitement around London's opening this morning, sending the JPY lower then higher for no obvious reason, but the net result was a JPY that is unchanged against the USD from Friday morning's level. Two sets of Japanese data came out overnight; the domestic corporate goods price index, which showed prices rising by 2.9% on the year, and machine tool orders, which were down by a provisional 1.1% in October. Neither had any impact on the JPY.  

USD shares the lead as investors avoid the EUR and GBP

USD shares the lead as investors avoid the EUR and GBP

EUR lower this morning on Italy fiscal concerns

EUR lower this morning on Italy fiscal concerns

CAD almost unchanged, helped by oil production cut

CAD almost unchanged, helped by oil production cut

GBP hurt by newly-negative Brexit narrative

GBP hurt by newly-negative Brexit narrative

JPY unchanged and unnoticed

JPY unchanged and unnoticed

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