Daily Brief

UK banks in good order

3 minute read

UK retail spree

Monday’s FX market did not promise much, and delivered less. The eventual 0.5% gap between the outlying Australian dollar and Japanese yen was just wide enough to prove that safe-haven currencies were not what investors wanted.

Although there has been more than one cautionary warning about “freedom day” in Britain next week, investors are not noticeably concerned about the lifting of UK Covid restrictions. Sterling was flat against the US, Canadian and US dollars, the Northern Scandinavian crowns, the euro and the Swiss franc.

Football and freedom day aside, there was little to affect sterling in political or economic terms. The only economic statistic was the British Retail Consortium’s like-for-like retail sales measure, which appeared at midnight. The report spoke of “exceptional growth… growing consumer confidence and the continued unleashing of consumer demand”. The picture was slightly more bullish than the Office for National Statistics’ reading and it made no difference to the pound.


Few data, dull data

It is impossible to pick out the highlights of Monday’s economic statistics, because there were none. Things became a little more interesting overnight but, even then, not by much.

South African manufacturing production increased by 35.3% in May2021 compared with the same month last year. Motor vehicles, parts and accessories were up 215.7%, while metal products and machinery rose 42%. The increase was exaggerated by Covid shutdowns in 2020 and, anyway, the 35.3% rise was dwarfed by April’s 88.1% spike.

Speeches by a couple of central bankers were unilluminating. European Central Bank Vice President Luis de Guindos played the quintessential two-handed economist role, explaining that “predictions can be right, but also can be wrong”. The New York Federal Reserve’s John Williams pointed out that “both Treasury and mortgage purchases are supporting [the] housing market”.



The ecostat highlight of today’s London session will be the US consumer price index numbers after lunch. There are also inflation readings from Germany and France (already out at 2.1% and 1.9%) and, early in London tomorrow, Britain and Spain. Tonight the Reserve Bank of New Zealand will make a monetary policy announcement.

NAB’s Australian Monthly Business Survey, released overnight, revealed that confidence “has taken a hit” as a result of rising Covid numbers. Business conditions “fell by 12pts to +24 index points in June after reaching a new high last month”. Business confidence was down by nine points at 11. In China, exports and imports both rose strongly in June.

This morning, the Bank of England published its biannual Financial Stability Report. In summary, it says that “banks are emerging from the pandemic in good health”. Governor Andrew Bailey will be answering questions about the report shortly after London opens.


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