Could it be 50 basis points?


Three days after the New York Fed's manufacturing survey showed a rebound in activity and confidence, their colleagues in Philadelphia told a similar story. The Philadelphia manufacturing index jumped more than 21 points to 21.8. "Most of the survey’s future activity indexes increased, suggesting improved optimism about growth for the next six months." Weekly jobless claims were roughly in line with forecast.

New York Fed president John Williams sent the USD south. Speaking of lower rates, he said "It's better to take preventative measures than to wait for disaster to unfold". Investors took it as notice of a 50-basis-point cut this month. Unusually, the Fed later issued a "clarification" saying that this was not what he meant. Investors paid less attention to the clarification than they had to Mr Williams's comment.


The euro benefited, though not by much, from the USD's indisposition. It strengthened by 0.1% on the day. Investors are aware that, whether the Fed might have it in mind or not, the European Central Bank is likely to make its own contribution to looser monetary policy before the end of the year, perhaps by embarking on another round of quantitative easing.

Data today showed German producer prices falling 0.4% in June, leaving them 1.2% higher on the year. Euroland's current account showed a seasonally-adjusted surplus of €29.7 billion in May.


Oil prices dipped again on Thursday. They picked up this morning on news that the United States had shot down an Iranian drone but WTI crude was still 1.5% lower on the day. It is down by 7% from a week ago. The CAD moved approximately in line with oil but showed a much more positive response to the drone story. It is 0.1% firmer against the USD.

There was only one Canadian statistic on Thursday but it was a good one. ADP's Employment Change report said nonfarm payrolls increased by 30,400 in June, more than compensating for the previous month's 16, 000 fall.


After two days at the back of the field and one in the doldrums, sterling led the field yesterday. It strengthened by 0.2% against the USD. The strong retail sales played a part in its recovery but the main factor was a vote in the House of Commons. Parliament approved an amendment designed to prevent the Prime Minister sending them home in order to force through a no-deal. It does not guarantee that Britain will not leave the EU without a deal, but the large majority of 315-274 was a clear demonstration of Parliament's opposition if the new PM tries to impose a no-deal Brexit.  

Separately, and less helpfully to the GBP, the politically-neutral Office for Budget Responsibility published an assessment of how even a benign no-deal Brexit would tip the UK economy into recession.


The consumer price index data released overnight showed the key Japanese inflation measure - prices excluding fresh food - slowing to 0.6% in June, the lowest reading in two years. Excluding food and energy, inflation was steady at 0.5%. The Bank of Japan is as far away as ever from its 2% inflation target and the numbers will increase the pressure on it to provide more currency stimulus.

That prospect caused the JPY to dip on the news. It is unchanged on the day, having been 0.5% stronger on Thursday evening.

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