Although there was really not much out there to encourage them, investors were less boot-faced on Wednesday than they had been the previous day, at least with respect to their appetite for safe-haven currencies. Sterling (GBP) was unchanged on average, with the Norwegian krone 0.6% ahead in the lead.
The consumer price index data from Europe scuppered the argument that inflationary pressures are waning, which had been sparked by Tuesday’s “low” US CPI figures. That view was also supported by higher energy prices in Europe (EUR), a situation exacerbated in Britain (GBP) by a problem with the cable that brings French nuclear power across the Channel. High and rising electricity prices might arguably put pressure on the Bank of England (GBP) to tighten monetary policy. However, in the current climate the bank would be just as likely to keep policy relaxed, so as not to further compromise consumers’ spending power.
Although the British cabinet reshuffle (GBP) monopolised yesterday’s rolling news and this morning’s headlines, investors paid little attention. The Prime Minister and the Chancellor of the Exchequer - at least for now - remain in office, making an imminent dramatic change in fiscal policy unlikely.
Not looking for work
On the face of it, this morning‘s Australian employment data (AUD) looked silly. The participation rate fell and 145k jobs were lost in August, yet the rate of unemployment was also lower. Technical factors made the difference.
The people who lost their jobs did not all figure as “unemployed”. Because pandemic lockdowns make many jobs impossible to carry out at the moment, laid-off workers do not currently have to be actively looking for work in order to collect benefits. In New South Wales alone, it is reported that 210,000 people have left the labour market within as little as two months. The AUD was hurt by the news but still unchanged against the USD, EUR and CHF.
The other surprising data overnight, also from the antipodes, were the figures for NZ gross domestic product (NZD) in the second quarter. Quarter-on-quarter growth was a record 2.8% and the numbers gave the Reserve Bank of New Zealand another reason to consider higher interest rates. The NZD shared third place with the JPY.
The top-billing data in the coming two days are retail sales; for the United States (USD) today and Britain (GBP) tomorrow. Analysts do not hold out much hope for strong US numbers but they expect the UK results to be respectable.
Today’s agenda begins in Europe with the trade figures for Italy and the Eurozone (EUR). After lunch Canada (CAD) reports on housing starts, wholesale sales and cross-border investment flows, and ADP prints its employment change figure for August. In the United States (USD), as well as the retail sales data for August there will be weekly jobless claims and the Philadelphia Fed’s manufacturing survey. New Zealand’s manufacturing PMI (NZD) and Australian new home sales (AUD) appear tonight.
UK retail sales (GBP) provide the opening shot on Friday, and are followed before lunch by Eurozone (EUR) inflation and construction output. The only other important number tomorrow is the provisional Michigan index of consumer sentiment (USD).