A degree of confusion

Brexit frisson

What do the following have in common: the Euro, the Swiss Franc, the Japanese Yen and the Norwegian Krone? They were unchanged against one another on Tuesday and the antipodean Dollars were within spitting distance. That's a lot of non-movement. Sterling rather spoiled the picture, taking last place with a -0.5% average decline.

Other than to say not much was going on, there is no clear reason why oil-exporting Norway's Krone was rubbing shoulders with the three renowned safe haven currencies. Oil-exporting Canada's Dollar strengthened by a cent despite falling oil prices while South Africa's Rand scooped the pool with a 1.4% gain even though economic growth of 0.2% was slower than expected in Q3.  To justify any of that price action demands a considerable imagination.

But let's try anyway, at least in Sterling's case. The Pound's fall, which in most cases came in the afternoon, seemed connected to the government's announcement that it would, after all, publish some of its Brexit plans ahead of a parliamentary vote to approve Article 50, should that be necessary. The interpretation was that Downing Street is pushing ahead regardless with Brexit and that news made investors slightly less enthusiastic about the Pound.

Australia slows, India cuts

Figures early today indicated a -0.5% quarterly slowdown in Australia's economy during Q3. The number was worse than most analysts had expected and cost the Aussie a swift cent. Meanwhile in India the talk was that the Reserve Bank would be forced to cut interest rates to a six-year low today.

Australia's -0.5% economic contraction was the biggest quarterly shrinkage since the depths of the global crisis six years ago. Economists did not see it coming and are so far at a loss to explain what went wrong. What they can see, however, is the risk that Australia could lose its AAA credit rating and a possibility of further rate cuts from the Reserve Bank of Australia next year. 

In Delhi the authorities are still struggling to contain the fallout from the Prime Minister's surprise decision a month ago to scrap 86% of the paper money in circulation. With the replacement currency still in short supply and merchants unwilling to accept the superseded notes economic activity has slowed sharply and the rupee has fallen by -5%. The RBI is expected to try to stimulate that activity with a rate cut today.

UK production

There are industrial and manufacturing output data this morning from Germany, Norway and the United Kingdom. After lunch the Bank of Canada is expected to keep its benchmark interest rate steady at 0.5%.

German industrial production rebounded by a modest 0.3% in October while in Norway it increased by 0.2%. The monthly gains for UK manufacturing and industrial production are pencilled in at 0.5% and 0.2%. Negative numbers may not go down well with Sterling.

The BoC is almost certain to stick at 0.5%. The main focus there will be on the central bank's accompanying statement.