Now what?

Herding cats

Monday's unexpected hiatus in the Brexit negotiations has taken the wind out of sterling's sails. It spent yesterday drifting gently backwards, falling by an average of -0.4%. The UK economic data did nothing to improve the pound's situation.

After better than expected UK purchasing managers' index readings on Friday and Monday analysts forecast that Tuesday's reading from the services sector would be lower on the month, down from 55.6 to 55.0. They got part of that prediction right: the services PMI was indeed lower on the month, but at 53.8 it was quite a bit weaker than expected.

Ecostats aside, it was the renewed political uncertainty that spoiled things for the pound. Until Monday lunch, investors had been psyching themselves up to believe that a Brexit deal was in the bag. With the DUP rebellion snatching defeat from the jaws of that victory there is less confidence that it will be alright on the night. The EU and the British prime minister are clearly anxious to reach an agreement. However, Theresa May is struggling to hold together a coalition not only with the DUP but with dissenting factions in her own party. 

Australian growth

Sterling avoided coming last on Tuesday because the Australian dollar came to grief overnight on account of weaker than expected third quarter growth. The Northern Scandinavian crowns shared the lead with gains of 1%, allegedly because investors saw them as havens from Brexit-related risk.

The predictions for Australian gross domestic product were that it would have expanded by 0.7% in Q3 and be up by 3.0% on the year. Both of those targets were missed. Third quarter growth of 0.6% brought annual growth down to 2.8%. They were not bad numbers but they were not as good as investors had been led to believe so the Aussie took a three-quarter-cent dive. It was down by a cent on the day against sterling.

America's $48.7bn trade deficit in October was the widest in nearly two and a half years. That figure was followed by two US services PMIs. One of them missed forecast by a point, the other by a point and a half. The dollar hesitated after the data but came back to add a net half-cent against sterling and a quarter of a cent against the euro.

BoC decision

In theory the biggest item on today's agenda is the Bank of Canada's monetary policy announcement. In practice, no change is expected to the BoC's 1.0% benchmark target interest rate. There are no UK ecostats on the list.

With German factory orders already out of the way - increases of 0.5% and 6.9% on the month and the year - there are no more data to come from the euro zone. Swiss inflation this morning is expected to be a couple of ticks higher at 0.9%.

After lunch ADP's employment change figure will serve as a pointer to Friday's US employment report. Tonight Australia reports on October's trade balance.