Sterling leads, yen lags

4 minute read


US existing home sales numbered 4.99m in December, 6.4% fewer than in November. According to the National Association of Realtors, "the partial shutdown of the federal government has not had a significant effect on December closings, but the uncertainty of a shutdown has the potential to harm the market".  

That shutdown has very certainly harmed the supply of US economic data. Among those stuck in the pipeline are the balance of trade, cross-border investment flows, retail sales, housing starts, building permits, construction spending, business inventories and factory orders. The ecostat shortage had no noticeable effect on the USD yesterday; it was on average unchanged against the other major currencies.


There was no administrative obstacle to today's euro zone figures; it is simply that there were not many of them. One, actually. The INSEE's business climate index came in at 102 for January. France's INSEE commented that "the business climate is stable after worsening sharply in the previous month". The composite indicator is slightly above its long-term mean (100). This morning the European Commission will release its monthly barometer of consumer confidence.

There were no tangible economic developments in Euroland but hard on the heels of Bloomberg's "Economic Winter" article, The Economist newspaper echoed the sentiment with a piece entitled "The euro area is back on the brink of recession", wryly noting "after two decades of underperformance that should not be surprising". As on Monday, the EUR was not unduly dismayed; it was unchanged against the USD.


Two Canadian ecostats emerged from Statistics Canada on Tuesday; manufacturing shipments and wholesale sales. Neither was helpful to the CAD. Shipments were down by 1.4% in November, more than the expected 0.9% decline, and sales fell 1.0% where they had been forecast to be flat. The fall in manufacturing sales was attributed to reduced sales of petroleum and coal products. For wholesale sales machinery, equipment and building materials contributed most to the decline.

Whilst the two figures had a hand in early losses for the Loonie they were not the prime mover. As is often the case, the CAD's track had a lot to do with the changing price of oil, which fell a cent and a quarter before recovering. It was a similar story for the CAD, which lost and regained a quarter of a cent, finishing up unchanged on the day.


The pound built on Monday's gains, adding another 0.6% against the USD. There were no UK economic data to help it along this morning but the GBP continued to bask in the glow of yesterday's strong employment data.

Sterling's main plank of support continued to be the growing confidence that Britain will not leave the EU without some sort of agreement on a transition. There are almost as many opinions as to what that agreement should look like as there are Members of Parliament. For the moment none of them would command a majority if put to the vote.However, there are at last signs that party-political positioning is being put aside in an attempt to reach some sort of consensus. The current feeling on the street is that Brexit day will be postponed, perhaps for several months: that feeling is, of course, subject to change.


The JPY was already on the retreat when the Japanese trade figures were released.They showed an annual deficit of ¥1.2 trillion ($2.2 billion) in 2018, the first yearly shortfall in three years. The gap resulted from exports and imports heading in opposite directions. Imports were down by 3.8% in December compared with the same month in 2017 while imports increased by 1.9%.  

There was no surprise when the Bank of Japan left monetary policy unchanged and it was hardly a shock that the BoJ lowered its inflation projections to 0.6% for this year and 1.0% in 2020. But surprise or not, none of the numbers created new demand for the JPY and it lost 0.2% on the day.

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