TradeWars 3.0

Bad news, good news
Not for the first time, the monthly data for UK manufacturing and industrial production fell short of analysts' predictions. Boo! Absolutely for the first time, the monthly figure for gross domestic product showed the UK economy expanding by 0.3%. Hooray!  

Investors decided to give sterling the benefit of the doubt. Never mind that the boost to GDP in May probably owed much to sales of bunting and Megan Markle table mats: The damage to growth done by bad weather earlier in the year was also an exceptional item. It is doubtful that monthly growth of 0.3% is sustainable but 12 months at that pace would mean an annual expansion of 3.7%.

Now for the other side of the coin: Manufacturing production went up by 0.4% in May, less than half the forecast increase. The broader measure of industrial production, which includes manufacturing, was down by 0.4% when it was supposed to have increased by 0.5%. With that in mind, sterling had a pretty good day, sharing first place with the Japanese yen and the South African rand. It added a fifth of a US cent and a third of a euro cent. 

Here we go again
After couple of days of cease-fire Donald Trump was back on his phone last night, announcing more tariffs on imports from China. The news had a belated impact on the yuan and an instantly negative effect on the Australian dollar.  

America intends to  impose 10% tariffs on a further $200bn of Chinese goods. The list of sanctioned items includes koi carp, feathers, ink and shampoo, all of them presumably critical to national security. Beijing's reaction was one of feigned shock. The fresh tariffs are "totally unacceptable" and will be met with countermeasures.

Although the news cannot have come as a shock to financial markets, it was nevertheless enough to send Far East equity markets lower after it came out around eleven o'clock last night. Among the major currencies the Australian dollar was hardest-hit, owing to Australia's dependence on exports to China. The Aussie was down by a cent and a half on the day.

Bank of Canada
Ecostats are fairly thin on the ground today: that is not to say the agenda is a boring one. Central bankers from the euro zone, the United Kingdom and the United States will be on the stage and the Bank of Canada could well deliver an interest rate increase.

Analysts are fairly confident that the BoC will raise its benchmark interest rate target from 1.25% to 1.5%. There is therefore limited upside for the Loonie. It could even fall back in a buy-the-rumour-sell-the-fact reaction. A no-change decision would almost certainly send it lower.

In Frankfurt the European Central Bank's president Mario Draghi and chief economist Peter Praet will be taking part in a statistics conference. In Boston the Bank of England governor Mark Carney will talk about the Global Financial Crisis (known by trendy economists as the GFC).