Daily Brief

Daily Brief

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He said Xi said

Truce

The discussion at the end of last week between the Chinese and US presidents was "a very, very good meeting, better than expected" according to Trump. Although there was no agreement, the trade talks are apparently "right back on track". Investors were grateful that there was no escalation.

They reacted this morning by reducing their holdings of the safe-haven Japanese yen and Swiss franc, which fell 0.8% and 0.9% respectively. The other side of that coin was rather less foreseeable. Where usually the Australian dollar would derive most benefit from the prospect of improved Chinese trade, it perked up only briefly before heading lower.

The Aussie's decline followed the Australian PMI, which came in at 49.4 for June, the lowest reading in almost three years. It was another reminder that the Reserve Bank of Australia is leaning towards a more relaxed monetary policy.

Lucky break

Over the 0600h - 0600h 24-hour basis used consistently in this column sterling was the leader among the major currencies this morning. It is not at all clear why: There were no positive surprises in Friday's GDP data, nor in the weekend pronouncements of the two prospective prime ministers.

Britain's gross domestic product expanded by 0.5% in the first quarter, in line with the earlier estimate. Annual growth was 1.8%. Business investment was not as woeful as it might have been (it fell in every one of the previous four quarters) but the quarterly increase of 0.4% left it 1.5% down from the same quarter last year.  

Messrs Hunt and Johnson continued to fish for the support of Conservative party members with a mixture of tax breaks and other bait. Mr Hunt tried to burnish his image as a tough Brexiteer when he told Andrew Marr that business owners should be prepared for their companies to go bust to ensure a no-deal Brexit.

Manufacturing PMIs

With the exception of Sweden, today's monthly round of manufacturing sector purchasing managers' indices did not get off to a good start. Sweden's 52.0 was a point lower on the month but at least it was better than forecast. The other numbers so far have not been.

China's NBS manufacturing PMI was unchanged at 49.4, having been expected to improve slightly. The services sector PMI from China was in the expansion zone above 50 at 54.2 but the other manufacturing PMI, produced by Caixin, was down at 49.4. Spain's manufacturing PMI was two points lower at 47.9. The Bank of Japan's Tankan business survey delivered mostly disappointing numbers.

French and American manufacturers are expected to deliver PMIs in the growth zone above 50 today but contraction is in prospect for the rest of Europe, including Britain. There will also be credit and mortgage data from the Bank of England this morning. Tonight the Reserve Bank of Australia is confidently expected to lower its Cash Rate from 1.25% to 1%; it would be the second cut in three months.

GBP: The mystery winner

GBP: The mystery winner

USD: Unmoved by apparent trade thaw

USD: Unmoved by apparent trade thaw

AUD: Rate cut expected tonight

AUD: Rate cut expected tonight

CHF: Safe-havens bring up the rear

CHF: Safe-havens bring up the rear

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