Today’s rate @ 08:00 1.1285
Morning Report 20.02.2018
Moneycorp Dealer Team
Sterling’s response to a reassurance from Brexit minister David Davis, in a speech he has not yet made, has been mixed. It is widely reported that Mr Davis will tell an Austrian audience that “Britain will not be plunged into a Mad-Max-style world borrowed from dystopian fiction”.
Well, that’s a relief. Or at least it would have been, had he not chosen to float the possibility. With Mad Max ruled out, investors are bound to wonder which alternative model he has in mind for his brave new world. Experience has taught them not to expect much clarity from ministers when they talk about Brexit so they will hardly be holding their breath ahead of Mr Davis’s outing.
With little else to affect sterling directly over the last 24 hours, it had a slight downward tilt. However, in common with the other major currencies, the pound did not move far. The US and Australian dollars shared the lead while the NZ dollar and Swedish krona brought up the rear with only 0.5% separating leaders from laggards. Sterling was unchanged against the euro, the franc and the yen.
There were no illuminating economic statistics yesterday. America was on holiday. Bank of England Governor Mark Carney and Reserve Bank of Australia Assistant Governor Michele Bullock both avoided mention of monetary policy during their speaking engagements. Investors struggled for inspiration.
Mr Carney’s topic was “Leadership in a Disruptive Age”. One of its essential qualities, he said, is clarity: “Say it straight. Say it simply. Say it over.” On that basis, and going by his comments a fortnight ago when he presented the Inflation Report, investors should be looking more confidently for a rate increase in the next three months, probably in May.
The minutes of the RBA board meeting did nothing to alter the outlook for Australian interest rates. They could move higher in 2019 but no change is expected this year.
Today’s rate @ 08:00 1.1285
Today’s agenda is not quite so bereft as Monday’s but it is hardly flush with potentially explosive ecostats and events. In the context of sterling, the CBI will print the results of its Industrial Trends survey and Mr Davis will rethink his use of the Mad Max analogy.
Ahead of London’s opening Switzerland presented its monthly evidence that a strong currency and a positive balance of trade are not mutually exclusive. The surplus in January was SFr1.3bn. NZ factory gate prices rose by 1.0% in the fourth quarter; in Germany, they were up by 0.5% in January alone. Coming up are Swiss industrial production, Swedish inflation, German and €Z investor sentiment, Canadian wholesale sales, NZ milk prices, Euroland consumer confidence and, as discussed, the CBI’s assessment of manufacturers’ order books.
A week on from the Foreign Secretary’s Panglossian vision of a post-Brexit Britain it falls to the Secretary for Exiting the European Union to reveal his own perspective today. Investors would be grateful for any properly solid information he might reveal.
Weekly Market Updates: Week-ending 16-02-2018
The euro neither distinguished nor disgraced itself, coming out of the week unchanged on average against the other major currencies. It strengthened by a1.0% against sterling and by 2.4% against the labouring US dollar. A large part of its success was down to the idea that the euro represented “none of the above”. It was the safe option for investors who did not want to get involved with the pound or the US dollar. And there was no shortage of them.
Their lack of regard for sterling arose from a mixture of uninspiring UK economic data and renewed Brexit uncertainty. The trade deficit was wider than expected and the first of a series of ministerial speeches, by Boris Johnson, failed to shed any new light on the government’s plan for leaving the EU. With the dollar, investors’ focus has swung to the US budget deficit, which seems destined to balloon as a result of tax cuts and increased spending.