Daily Brief

Talking heads

It’s how you tell it

There were two UK-centric speeches on Tuesday. One of them should have helped sterling but didn’t, the other ought not to have done but sent it higher. Marketing is everything. Anyway, the pound came within an inch of being the day’s top performer, beaten only by the Canadian dollar.

The first presentation was by Bank of England chief economist Andy Haldane. The gist of his speech, “The Second Quarter”, was that Britain is on course for a V-shaped recovery that will come sooner and faster than expected, bringing with it the risk of higher inflation. It was the sort of talk that would traditionally encourage buyers of the currency but yesterday morning they were conspicuous by their absence.

A lunchtime it was the turn of the Prime Minister to make an appearance at the Dudley College of Technology. In his “Economy Speech” he banged the drum (and the rostrum) for the £5 billion of capital infrastructure spending that his office had leaked the previous day. Although the Johnson plan is more of a rehash of last year’s election manifesto, he presented it with an enthusiasm that inspired buyers of the pound. Sterling gained half a US cent and three quarters of a euro cent, strengthening by an average of 0.3%.


Upbeat and uncertain

A rather different double act took place in Washington D.C. when the Treasury secretary and Federal Reserve chairman appeared in masks before the House Financial Services Committee to talk about the response to the tragic Covid-19 pandemic. One was upbeat about rising employment and a return to growth, the other was the Fed chairman.

Mr Mnuchin has made a habit recently of talking up the economy and he was at it again on Tuesday, listing all the ways the administration was helping the American people. Mr Powell was more circumspect, pointing out that “the path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus”. Investors seemed to pay more attention to Mr Powell, because the dollar was lower after both had said their piece.

From sterling’s point of view the villain on Tuesday was the Canadian dollar. After data that showed gross domestic product tumbling 11.6% in April the Loonie moved higher, presumably because investors had been led to expect a 13% contraction. It strengthened by a fifth of a cent against sterling.


Lots of numbers

The first of the month means the first round of finalised purchasing managers’ indices, most of them for the manufacturing sector. Australia set the ball rolling with AiG and Markit both reporting growth at 51.5 and 51.2 respectively.

China’s Caixin also produced a 51.2 but Markit in Japan let the side down with a feeble 40.1. Among the overnight data were the May building permit numbers from New Zealand and Australia. They went in diametrically opposite directions, New Zealand up 35.6% and Australia down 16.4%.

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