Loonie wins again


The NFID Small Business Optimism Index - it does what it says on the tin - scored a 104.4 for December, down from the previous month's 104.8. Its authors noted that "optimism among small business owners continues to push record highs". Indeed it does; the record was set in October at 108.8. But, like several similar barometers, the recent readings have headed consecutively lower. It is not cause for particular concern about the US economy but nor is it evidence of unfettered growth.

The president, meanwhile, was engaged on two fronts. His address to the nation, pleading for funding for his Mexican Wall, added little to the government shutdown debate.  His efforts on Sino-American trade looked potentially more fruitful. The first round of negotiations has been completed in Beijing and both sides profess optimism that a deal will eventually be done. The news did more for commodity-oriented currencies than it did for the USD.


Today's euro zone economic data were less worrying than those on Monday and Tuesday.  The only pan-Euroland figure was for unemployment, and it dropped to 7.9% from a downwardly-revised 8.0%. Italian unemployment was a rather less impressive 10.5% but even that was a tick lower on the month. The German trade data could also be seen as helpful. Exports were down by 0.4% in November but the 1.6% decline in imports was bigger, resulting in a wider trade surplus. The only sour note was French consumer confidence, which was down by five points at 87, a 27-month low.

The numbers did not do much for the EUR but they did it no harm. Against the USD it is microscopically firmer, up by an insignificant tenth of a cent.


After a shaky start it was another good day for the Loonie. Its biggest help came from oil prices, with WTI up by 3.7% on the day and 20% above its pre-Christmas lows. The Canadian economic data were of less assistance. Imports fell by 0.4% in November but exports fell further, down by 2.9% on the month. The trade deficit widened by 142% to just over $2bn.

Today the Bank of Canada will release its monetary policy report and reveal the result of its monetary policy meeting. Investors expect the bank to keep its benchmark interest rate target unchanged at 1.75% and to keep open the path towards higher rates in the future. Governor Stephen Poloz will be quizzed on the matter at a press conference.


In Parliament yesterday the government was defeated by 296 to 303 votes on an amendment to the Finance Bill. The bill is not directly related to Brexit but critics of Theresa May's proposal - including "leavers" and "remainers" on both sides of the house - were able to introduce a technical obstacle to a no-deal Brexit. The amendment does not, in and of itself, prevent Britain from leaving the EU with no deal. It does, however, demonstrate cross-party opposition to such an outcome, which could grow into something more substantial if the prime minister persists with her my-deal-or-no-deal stance.

The vote went some way to mitigating what otherwise was a bad day for the GBP. Sterling was the day' weakest-performing major currency, though it was only fractionally behind the USD with a loss of 0.1%.


The yen managed to extricate itself from the doom loop that had cost it 1.5% since New Year's Eve. Although there were no fresh panics encouraging investors to take shelter in the safe-havens,  neither was any new mileage to be seen in depressing the JPY.

Continuing the trend this week, Japan managed to push out just one economic statistic. Cash Earnings (a misnomer because it also includes earnings paid to bank) rose by 2.0% in the year to November. It was an improvement on the 1.5% wage hikes seen in the year to October. 

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