Fairly dull


There was the bad news and the not-so-bad news. The Chicago Fed National Activity Index (CFNAI) was tolerable, given that it improved from -0.48 to -0.05 and was better than expected. However, it was still negative, indicting below-trend growth. The Dallas Fed's manufacturing index was not good at all, falling seven points to -12.1. The report spoke of outlooks worsening and uncertainty rising. A supplement showed that protectionist tariffs had increased prices, reduced profits and had a net negative effect on all aspects of business.

The data did nothing to alter the expectation of lower US interest rates in the near future, and the USD struggled at the back of the field. For the president the cut cannot come soon enough. He said yesterday, "Think of what it could have been if the Fed had gotten it right. Thousands of points higher on the Dow, and GDP in the 4's or even 5's".


The euro has taken the day off, and no Euroland economic data appear on the agenda. There are appearances by two European Central Bank chiefs. Luis de Guindos, Vice-President of the ECB, has already said his piece, discussing the link between low interest rates and commercial banks' profitability. Benoît Cœuré will be speaking this afternoon.

Yesterday and overnight the EUR plodded higher, testing the ground above $1.14 and making a three-month high. In Europe this morning it ran out of juice, giving back all of its gains. It is unchanged on the day against the USD.


There were no Canadian data to hinder the Loonie and none to help it either. It was a similar story with oil prices: WTI crude is unchanged on the day, though that did not prevent the CAD following its every twist and turn.

The CAD is 0.1% firmer against the USD. It might see some action today when the Canadian wholesale sales data come out but don't bank on it.


In London this morning sterling managed to gain a 0.3% advantage over the USD. It is not clear what gave it the advantage and until that point it had been keeping company with the USD at the back of the field. This morning's UK statistic, the CBI Distributive Trades Survey of retail sales, did remarkably little damage. The report said "Retail sales volumes fell at their fastest pace since March 2009 in the year to June".  

A candidate for Conservative leader, Boris Johnson briefly broke cover to talk to the BBC about his Brexit plans, if not about the verbal altercation on Thursday night. Although his vision was lacking in detail he did not appear to be pushing for a no-deal Brexit. The essence of Johnson's thinking is that "politics has changed so much since 29 March", when Theresa May's Withdrawal Agreement was defeated for a third time in parliament. He was optimistic about the Irish border ("abundant technical fixes") and anticipated cooperation from the EU to avoid tariffs in the event of no-deal.


USD/JPY is in the process of testing the lows of early January. It rebounded in Europe to leave the JPY 0.3% higher on the day against the USD.  

Japan's corporate service price index increased by 0.8% in the year to May, down from the 1.0% increase seen a month ago. The minutes of the Bank of Japan monetary policy meeting reveal that the bank is aware of the risk it would run if it had to crank up its quantitative easing program to deal with another recession.

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