The dollar did not have a great deal of fun during the New York session or overnight. It picked up the pace this morning in London, adding half a euro cent for a daily gain of 0.5% over the EUR. The Richmond Fed's manufacturing index was the sole US economic statistic. Its decline from 29 to 15 was mainly the result of falls in the shipping and new orders components. Overall, though, " survey respondents were optimistic, expecting to see positive growth across most measures in the coming months." In today's first round of purchasing managers' index readings from Europe and the States - the provisional figures - the US services PMI is the only one of the 12 expected to show a monthly improvement.
The spotlight is still squarely on Italy's 2019 budget. There is no change in the stance of the two interested parties. The EU wants Italy to run a smaller deficit than the 2.4% it has proposed: Italy says there is no Plan B and appears to be spoiling for fight with Brussels. Investors are not worried that Italy could default on its borrowings; that is a vanishingly small possibility. However, they are concerned about the effect such a fight could have on the coherence of the euro zone and its future progress.
The Loonie was exactly unchanged on the day against the USD, having covered a range of less than half a cent. There were no Canadian ecostats to excite it and there are none today either. What there will be, however, is an announcement by the Bank of Canada that it has increased its benchmark interest rate from 1.5% to 1.75%. That is not guaranteed, of course, but if it doesn't happen a lot of investors will be extremely surprised. The main question is where the CAD will go afterwards. Traditionally, if the world expects a rate hike and the world gets a rate hike the currency moves lower as a result of profit-taking sales. But hey, what is tradition worth nowadays?
Sterling shared the pain of the EUR as the USD moved 0.5% ahead to a six-week high. The GBP's main problem, as usual, was the lethal morass that is Brexit. There was a chink of light when the media carried a story that the EU might offer Britain a customs union. It faded as soon as investors realised that prime minister May would struggle to sell the idea to her own fractious party, let alone Parliament as a whole. The single UK ecostat was the Confederation of British Industry's Industrial Trends Survey of manufacturing order books and it was not great, the index falling from -1 to -6.
The USD strengthened by 0.4% against the JPY, reflecting increased nervousness about the multiple issues threatening the global economy (think trade wars, Brexit, Italy, Saudi, China and so on). Investors' uncertainty seems to be increasing; one day they are sanguine about it all, the next they are nervous. Because of that the JPY is changing direction almost on a daily basis. On Tuesday it went down; watch this space.