Sterling does it again


January's pending home sales and December's factory orders were the only two fresh US economic statistics on Wednesday. Pending home sales looked breezy enough, with a 4.6% monthly increase more than offsetting the previous month's 2.3% decline. Factory orders were less impressive, with a meagre 0.1% rise doing little to compensate for November's 0.5% fall. The revised durable goods orders data showed a 1.0% fall in non-defense capital goods orders - call it business investment - after an initial estimate of -0.7%.

On the political front there was less than positive news from the Sino-US trade negotiations and the Trump-Kim meeting in Hanoi. The president walked out of his meeting with North Korea's supreme leader and his trade advisor, Robert Lighthizer, played down expectations of an early trade, saying "we'll just wait until we can get a great agreement".  


There was no shortage of data from the euro zone this morning but nothing from Euroland as a whole. National inflation figures put France at 1.5% and Spain and Italy at 1.1%. Germany reports later today. There were no surprises and the EUR is unchanged against the USD.

Away from the ecostats, the euro zone had little to say for itself. Sentiment towards the EUR was doubtless improved by the British parliament's ongoing efforts to steer the government away from a cliff-edge Brexit but the main beneficiary was the GBP.


The Loonie is down by 0.2% against the USD, principally as a result of softer-than-expected consumer price index data. Analysts had predicted that headline inflation would have slowed from 2.0% to 1.5% in January: in fact it fell to 1.4%. The Bank of Canada's "core" measure was down from 1.7% to 1.5%.

Ahead of the inflation numbers the CAD had looked promising, assisted by the upward direction of oil prices. But low inflation took the wind from its sails and it faded further overnight as oil prices dropped back and WTI crude had to settle for a daily increase of just 50c, 0.7%. 


Sterling was the top performer for a second day in succession. It strengthened by an average of 0.6% and is up by 0.2% against the USD.  The GBP is unbeaten in the last week, the last month and the year to date. It has gone up by five and a half US cents - 4.3% since the beginning of January.

All of those gains are the result of greater optimism that Britain will avoid a disorderly "cliff-edge" departure from the European Union. The main question at the moment - though of course this could change over time - is how long Brexit will be postponed from its due date of March 29. The pound's upward progress yesterday was sparked by a newspaper report that the EU will not accept a short postponement; it will be looking for a delay of 21 months or none at all. From investors' point of view, the longer the delay the better, especially if it means no Brexit at all.


Japan made up for the last few days' data drought with a handful of ecostats overnight. Industrial production was flat in January, for an annual decline of 3.7%. A 2.3% decline in retail trade dragged sales growth for the year down to 0.6%. Housing starts were down by an annual 1.1% while construction orders were up by a mighty 19.8%.

The Japanese data had less impact on the JPY than the progress of the US president's meeting with Kim Jong-Un. Reports of great progress initially caused the safe-haven yen to lose ground. When Trump walked out of the talks early the JPY moved higher. It is a net 0.3% lower on the day.

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