Focus on commodities

Franc and honest

Researchers at Binghamton University have discovered that punctuation marks in messages make the writer appear insincere with that in mind Tuesday was another good day for the safe haven currencies the franc led the way the Norwegian krone brought up the rear and sterling found itself caught in the crossfire. 

The pound got off to a less-than-auspicious start, coming under moderate pressure as soon as London opened. Its situation was not improved by the UK production data at half past nine. Although a 0.1% monthly increase in industrial production narrowly beat the 0.0% forecast, manufacturing production, which was also supposed to have been flat, disappointed with a -0.4% decline. The NIESR's estimate that the UK economy expanded by 0.6% in the three months to November was in line with expectations and therefore of little help.

Sterling lost a net one and a quarter Swiss cents, one euro cent and one yen. It was down by a third of a US cent and fell by that same proportion, on average, against the other dozen most actively-traded currencies. A mini mid-day surge by the Swiss franc had no obvious cause but was enough to leave the currency ahead on the day.

Low for longer

Whilst the US dollar could only manage fifth place on Tuesday it did touch multi-year highs against the Canadian dollar and the Norwegian krone. Except against the franc, the euro continued to hold onto the gains that followed last Thursday's policy announcement by the European Central Bank.

Both the Loonie and the krone are feeling the heat from oil prices, which rebounded only slightly from seven-year lows yesterday afternoon. The Canadian dollar touched an 11-year low against the Greenback while for the krone it was a 13-year low. It seems that investors have come to the conclusion that the autumn bounce in energy and commodity prices was of the dead-cat variety: they are no longer holding their breath in anticipation of anything more serious. 

The announcement that Anglo American, a mining firm, will be cutting 85k jobs rams home the reality that even the industry itself expects no early relief from depressed prices. The idea now is that they will remain lower for longer. Contrarians might see this as a buying opportunity but they should beware of trying to catch falling knives. 

Waiting for the antipodeans

With Chinese inflation and Germany's trade surplus already out of the way (1.5% and €20.8bn, since you ask) the ecostat agenda for the European day looks more than a little bare. The big events come tonight, with an RBNZ rate decision and the Australian employment data.

There is more than a sporting chance that the Reserve Bank of New Zealand will cut its benchmark interest rate from 2.75% to 2.5%. If it fails to do so, expect the Kiwi to strengthen.

In Australia the unemployment rate is expected to tick up from 5.9% to 6.0%. Any worse figure would hurt the Australian dollar.