Brexit uncertainty continues


Another unexceptional day for the USD left it barely changed, on average, against the other major currencies. Economic data generated by private sector entities went some way towards filling the gap caused by the government shutdown but failed to generate any real passion. The Redbook index put retail sales 5.8% higher on the year in late January. Case-Shiller's index showed house prices rising by an annual 4.7%. The Conference Board's survey found consumer confidence fading again in January, down by six and a half points at 120.2.

Ahead of the high-level trade talks that begin today technology company Apple provided a reminder of what can happen when things go badly. It joined a longish list of US firms that are losing business in China as a result of the economic slowdown and the trade war. Observers of the Sino-US negotiations are not entirely convinced that the situation will improve any time soon.


There was no shortage of data from the euro zone this morning but none of them were of major importance and most were national, rather than pan-Euroland, statistics. France reported that its economy expanded by a provisional 0.3% in the fourth quarter of 2018, matching the performance in Q3. German consumer confidence improved by half a point to 10.8. Spanish retail sales increased by an annual 0.8% in December. For Euroland as a whole the European Council published a handful of confidence measures, all of which were lower on the month in January. The EUR was practically unchanged against the USD.

With Brexit Britain hogging the headlines there was little to be seen on the European  political front. One story that did make it onto the radar was that Bulgaria intends to join the EU banking union this summer, beginning a two-year process that will result in membership of the euro in 2022.


The Loonie was 0.1% ahead on the day, helped by a $1, 1.7%, rise in the price of WTI crude.  

There was nothing for investors to see among the economic data so they were left to ponder Canada's strained relationship with China, and how it might be impacted by the extradition of Huawei's CFO. They will have something more concrete tomorrow, with the raw material and industrial product prices indices and the estimate of GDP growth in November.


For sterling it was all about the votes in the House of Commons. Parliament was considering several amendments to the prime minister's Plan B for leaving the EU, which could have postponed the process or legislated against leaving without an agreement. Two of the amendments won the approval of the house; one which requests - but does not require - the government not to leave the EU without a deal; the other which seeks to solve the thorny problem of the Irish border using "alternative arrangements".

Investors were disappointed that the rejection of another amendment that would have permitted parliament to postpone the date of Brexit beyond March 29. Sterling slid lower as the result of each vote was announced. It is 0.4% lower on the day and the weakest performer among the majors.


Investors demonstrated again this morning just how little interest they have in Japanese economic data. Large retailers' sales declined by 1.0% in December compared with the same month in 2017 while overall retail trade was up by 1.3%. Both numbers were better than forecast but neither was enough to move the JPY.

The yen is 0.1% higher on the day. It is up by 1.3% from its position a week ago.

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