Marking time

Michel Barnier, the EU's chief Brexit negotiator, yesterday evening gave Downing Street 48 hours to come up with workable proposal for the Irish border. Failure to do so would scupper any chance of the European Council giving its approval next week to trade talks. Sterling hardly flinched.

As well as the EU ultimatum, investors also had to cope yesterday with the Brexit secretary's claim that the government's impact assessments of leaving the EU don't actually exist. It would have been reasonable for investors to have at least a bit of a go at the pound on Wednesday but they decided to sit on their hands to see what would turn up. Sterling was on average unchanged against the other dozen most actively-traded currencies and precisely unchanged against the euro and Swiss franc. 

It lost two thirds of a US cent and was steady against the Japanese yen. In view of the US president's endorsement of Jerusalem as the capital of Israel, both of those outcomes are slightly surprising. It seems that investors' ability to turn a blind eye to tensions in the Far East is also transferrable to the Middle East.

Expecting more

After the Bank of Canada kept its interest rate target unchanged at 1.0% the Loonie dropped two cents. It is down by four fifths of a cent on the day. The Aussie lost only half a cent on news of a narrowed trade surplus but investors were not impressed.

Last Friday's Canadian employment data had evidently been strong enough to persuade some investors that the BoC could tighten policy, even though most analysts expected it not to do so. Their hopes were dashed by the gentle tone of the BOC statement: not only did leave interest rates alone yesterday, it gave the impression that it would continue to do so for some time.

Australia's narrowed trade surplus was more cut and dried. Imports went up by 2% in October; exports were down by -3%. The data did not present an exactly compelling reason to buy the Aussie.

Important things

The agenda for Thursday and Friday includes several important, if not quite momentous, events and statistics. Most of them are scheduled for Friday, including UK output and trade, US employment and the next Brexit deadline.

Today's highlights are €Z and (tonight) Japanese third quarter growth. The European Central Bank president will be speaking this afternoon. Friday opens with the Chinese trade figures and Australian mortgage lending before moving on to the UK trade data as well as manufacturing and industrial production for October. At lunchtime the NIESR offers its assessment of growth in the three months to November.  The US employment report is forecast to show a 200k monthly increase in nonfarm payrolls, rather more than the 169k average for the year so far.

Sterling's fate is likely to depend on a solution to the Irish border question. The EC president fears political fallout if one cannot be found soon.