The politicians’ pastime of cracking nuts with sledge hammers is not restricted to the festive season; this latest iteration just happens to coincide with the run-up to Christmas. Frustrated by his failure to win support for a mansion tax, Deputy Prime Mister Nick Clegg has come up with another idea to win populist support by tormenting “the rich”. This one’s a corker; he wants to prevent wealthy people from receiving bus passes. If his proposal goes through plutocrats will no longer be allowed to wait in the freezing rain for a free ride on the number 27 to Poundland. They will have to drive there in the Jag, at their own expense.
Mr. Clegg is not the only Liberal Democrat making the news this morning. Three years after the Democratic Party of Japan swept it from power, Shinzo Abe’s Liberal Democratic Party has swept back in again, winning 294 of the 480 seats in the lower house. Even though the result was widely anticipated, the news was costly to the yen. Jointly with the Swedish krona and the Canadian dollar, the yen was the worst-performing currency on Friday and over the weekend. The krona’s fall was apparently a delayed reaction to Swedish figures showing -0.1% deflation in the year to November and an increase in the rate of unemployment from 7.1% to 7.5%. The Canadian dollar roughly kept company with the other two “commodity” dollars, the Aussie and the kiwi, which also moved lower. The yen went down for the same reason that it has fallen by 6% in the last month; Abe San’s plan to reinvigorate the economy by aggressive quantitative easing. The strategy is not directly aimed at weakening the Japanese currency but there can be little doubt that it will, and that the government will welcome that weakness.
Friday’s top performers were the euro, the Swiss franc and, coincidentally, the South African rand, but their gains were of less than a dozen euro ticks against sterling. Practically, the four of them were much of a muchness. Other than the yen and, perhaps, the Swedish crown, the price action on Friday and early this morning appeared to owe more to jumpiness and seasonal illiquidity than to hard economic evidence. Friday’s provisional purchasing managers’ indices (PMIs) from Euroland were not as bad as they might have been; the German services sector reading was a useful 52.1. But France’s 44.6 for manufacturing was less than inspiring. The US data were the best of the lot with industrial production rising by a monthly 1.1% and the manufacturing PMI jumping two points to 54.2.
Today began with an improvement in New Zealand consumer confidence and -3.3% fall in the asking prices or UK residential property. Neither had a logical effect on the GBP/NZD exchange rate. Just to be awkward it moved higher. The pickings for the rest of the day will be thin: Euroland’s balance of trade, Canadian and US international investment flows and the New York Federal Reserve’s manufacturing index. The FX market will be thin too. Most market participants will be at their desks this week but they won’t be busting a gut to get involved in fights that don’t concern them.