Daily Brief

Daily Brief

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Going nowhere

Nothing to excite

The disappointment yesterday came in various forms while upbeat news was fairly thin on the ground. Most of the economic data failed to live up to investors' expectations and the political noises in Europe and America were unconstructive. Sterling came out of it well enough; on average just about unchanged.

The highest-profile statistics on Wednesday showed US consumer prices rising 1.8% in the year to May with core inflation slowing to 2.0%. Those levels might not themselves encourage the Federal Reserve to take interest rates lower but nor do they stand in the way of a cut. There is considerable disagreement about the course of Fed policy: financial futures pricing implies at least one cut this year but economists do not necessarily agree. The consensus of a Reuters poll was for no change this year.

Of more immediate concern to investors was the broadening scope of the US president's trade war. With regard to China, he said the only deadline "is what's up here", pointing to his head. That could mean anything. Another bone of contention has re-emerged too; the Nord Stream 2 pipeline that will carry gas under the Baltic Sea from Russia to Germany. Trump is considering sanctions to prevent its construction, forcing Europe to buy gas from the US, not Russia.

Risk off

The below-par ecostats and the trade war rumblings were not the only factors that reduced investors' risk-appetite. An attempt in the Commons to block a no-deal Brexit coincided with another pretender to Theresa May's crown speaking in favour of one.

Boris Johnson, the odds-on favourite to become prime minister, made a speech in which he was adamant that Britain would leave the EU on 31 October, with or without a deal. Given the current situation, "without" is on paper the more likely outcome. Sterling took a hit when the commons vote failed to prevent that happening. Instead of being the top performer for a second day it lost ground to the US dollar and Japanese yen.

Overnight the Aussie dollar came off worst as a result of the Australian employment data, losing two thirds of a cent to the pound. The numbers were not exactly bad, but they were nowhere near good enough to avoid another rate cut by the RBA.

Running down

There are few highlights on the next two days' agenda. The Swiss National Bank is expected to keep its policy rate unchanged at -0.75% this morning and US retail sales come put tomorrow afternoon.

Today's data cover Euroland industrial production, US jobless claims and Canadian new house prices. Tomorrow's relate to Japanese, Chinese and US production, French and Swedish inflation, US retail sales and US consumer confidence.

This afternoon brings the first weeding-out of candidates for leadership of the Conservative party. Any who fail to win 17 votes will be eliminated; if all receive more than that, the one with fewest gets launched. A result is expected by 26 July.

GBP: Mostly steady as PM selection begins

GBP: Mostly steady as PM selection begins

JPY: The winner as risk-off mood spreads

JPY: The winner as risk-off mood spreads

USD: Trump gunning for German pipeline

USD: Trump gunning for German pipeline

AUD: Awaits data following trade war slump

AUD Jobs data not bad but not good enough

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