Investors wary about trade


The dollar was more chart-driven than data-driven on Thursday. This was just as well, because the only US ecostats were the weekly jobless claims, which were fewer on the week yet still not as good as expected, and consumer credit, which increased by slightly less than predicted in December. None of the numbers was controversial.

There was disappointment when the White House let it be known that the president would not be holding top-level trade talks with China's president Xi before the beginning of March, when the truce in the trade war is scheduled to end. Although an escalation of tariffs would not be good for the US economy, investors decided yesterday that the consequences for other countries would be no better.


This morning's data from Euroland came from Germany, Italy and France. The German numbers were less depressing than some of their predecessors, with the balance of trade widening as exports grew more quickly than imports. France scored reasonably well too, with industrial output rebounding by 0.8% in December. The Italian data, however, were not at all pretty: industrial output declined by 0.8% in January to a level 5.5% below the same month last year.

France has recalled its ambassador to Italy, complaining of "unfounded attacks and outlandish claims". Paris took umbrage after Italian deputy prime minister Luigi di Maio met French anti-government "gilets jaunes" protesters near Paris on Tuesday, offering them his tacit support. The altercation represents an escalation of ongoing clashes between Rome and Paris over a range of policies. It has not so far had an effect on the EUR, which is 0.2% lower against the USD.


The Loonie was not so closely-bound to oil prices but they were the only real influence yesterday. Oil was down by 3%, more than 5% off its levels at the beginning of the week, and the CAD was 2% below Monday's levels, having lost 0.6% on Thursday. The Loonie and the price of WTI crude both touched two-week lows.

The apparent lack of progress on Sino-US trade did not improve the CAD's situation. Nor does it help that countries around the world are preparing themselves for slower growth. Neither development is positive for oil or the CAD.


Sterling had a good day, though that did not look the most likely result at the outset. After retreating in early Europe the GBP rebounded strongly after the Bank of England announced that monetary policy would remain unchanged. The two events were not directly related, though the BoE governor did say in his subsequent press conference that markets "should not prepare for a scenario without rate hikes".

The main push for the GBP came from rekindled hopes that Britain will be able to reach a deal with the EU to avoid a disorderly Brexit. That optimism was worth 0.2% to the pound.


The yen continued to wander aimlessly, losing 0.2% to the USD. It is unchanged from its position a week ago.

Japanese data released overnight had predictably little impact on the JPY. Household spending in December was down by 0.1% from the same month in 2017, in other words practically flat. Bank lending continued to grow at a 2.4% annual pace. Wages went up by 1.8% in the year to December, a tick more than the 1.7% increase reported a month earlier.

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