Daily Brief

Daily Brief

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Good vibrations

What a difference a May makes

At a seven-hour cabinet session yesterday it is reported that 14 of the 24 ministers favoured a no-deal Brexit. Theresa May was not one of them.  Following the meeting she made a statement inviting the leader of the opposition to cooperate in finding a solution. Sterling reacted positively.

Although some are suspicious that the prime minister's intention is simply to repackage her my-deal-or-no-deal strategy, investors were happy to take what she said at face value. They see it as a clearer route towards a softer Brexit, a customs union and maybe even membership of the single market. As yet, they have not considered the possibility of a no confidence vote and a change of government: that could change.

Investors marked sterling up, sending Cable nearly a cent higher in fairly short order. As other currencies sat back to watch, the pound made gains on every front, strengthening by an average of 0.5% on the day. Sterling is up by three quarters of a US cent, half a euro and half a Swiss cent. It is still 0.4% below its positions a week ago but the overnight move did a lot to reduce the deficit.

Little movement elsewhere

The pound was the only real mover on Tuesday. Less than 0.2% separated the yen, the euro, the Swissy and the US dollar. The Canadian and NZ dollars were there or thereabout too while the Aussie took second place to sterling, two fifths of a cent behind.  

The lack of movement was the result of a general shortage of economic data. Britain's construction sector purchasing managers' index was almost unchanged at 49.7, held back by a "sustained fall in commercial work". US durable goods orders fell 1.6% in February and non-defence orders excluding aircraft - a guide to what is going on in the day-to-day private sector - were down by 0.1%. Both numbers were close to forecast.

The figures from Australia overnight were positive for the Aussie, helping it to regain the ground lost as a result of yesterday's slightly dovish Reserve Bank of Australia statement. AiG's performance of services index improved fractionally to 44.8. Retail sales increased by 0.8% in February. The trade surplus widened to $4.8 billion.

PMIs 2.0

Services sector PMIs dominate today's ecostat agenda. The UK measure is forecast to be about half a point lower on the month at 50.9. In Euroland the numbers are expected to show that the services sector firms are having a better time of it than manufacturers.

China's Caixin PMI continued the trend of recovery seen at the weekend.  Services sector activity grew "at the fastest pace in 14 months". France is expected to remain in the shrinkage zone with growth in Italy, France, Germany and the euro zone as a whole. The strongest readings will probably come from the United States.

Prime minsters' questions at midday should be fascinating. The European Union Withdrawal Bill which follows could be even more so: It will be the first time in this process that parliament has attempted to pass legislation of its own. 

GBP streaks ahead after PM concedes to cooperation

GBP streaks ahead after PM concedes to cooperation

EUR roughly steady against USD, CHF and JPY

EUR roughly steady against USD, CHF and JPY

AUD takes silver after good sales and trade data

AUD takes silver after good sales and trade data

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