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Upsides of March

There it goes again

To describe events in financial markets as unprecedented is almost invariably an exaggeration. However, it is at least rare that a currency behaves as sterling has over the last four days, coming in last, first, last and first place among the majors. On Tuesday it reached for the sky after parliament prevented a no-deal Brexit. 

The slight snag there is that parliament did not prevent a no-deal Brexit. It would if it could but it couldn't. All MPs were able to do was express their wish not to see Britain leaving the EU without an agreement. Actually to prevent it would require a change in the law, which is not what happened last night. 

That was fully understood in Europe but not, perhaps, by the investors who piled into sterling, sending it once again to the front of the major currency field. It is an average of 1.0% higher on the day, with gains of one euro cent and one and a half US cents. Compared with a month ago it is an average of 3.4% higher and it has strengthened by 4.5% in the year to date.

Durable goods orders

The monthly change in US durable goods orders is one of the most difficult ecostats for economic forecasters to deal with. They seldom get it right because one big order can alter the whole picture. Their best guess yesterday was that orders fell 0.5% in January: in fact they went up by 0.4%.  

All of that increase was accounted for by transportation orders - trains and boats and planes. Without them, orders were down by 0.1%. The dollar strengthened briefly on the news before resuming its downward slide against the euro, eventually losing a third of a cent.

Euroland ecostats were few. Spanish inflation was steady at 1.1% and euro zone industrial production increased by a monthly 1.4%, more than the forecast 1.0%. US producer prices were up by an annual 1.9% and construction spending increased by an above-forecast 1.3% in January.

Spring statement

Tucked in between prime minister's questions and the debate on a no-deal Brexit, the chancellor's Spring Statement included a review of government borrowing - £3bn less than expected - and a downgraded forecast that gross domestic product will expand by 1.2% this year.  

At another time the chancellor's statement might have generated more interest - and more column-inches (-centimetres) but the media yesterday were consumed by Brexit and it passed by almost unnoticed. 

It is likely - oh, come on, it's a racing certainty - that their focus will be on Brexit again today, ahead of the vote on postponing B-Day beyond 29 March. As was the case with the last two votes, the amendments selected by the Speaker will be at least as important as the motion itself. On the assumption that, with just a fortnight to go, there must be a postponement of some sort, the length of that postponement will be key. It is probably fair to say that, ceteris paribus, the longer it is, the better for sterling.

PS The writer is aware that some readers will be exasperated by what they see as excessive Brexit coverage, especially in recent weeks. However, the aim of this column is to examine what happened yesterday to affect currencies and to consider what the coming day might bring. Without doubt the most significant force acting upon sterling recently has been, and will continue to be, the Brexit process. Sorry.

GBP Back into the lead after no-deal Brexit "ruled out"

GBP Back into the lead after no-deal Brexit "ruled out"

USD Only momentary help from durable goods orders

USD Only momentary help from durable goods orders

EUR Unhurt by €Z production data

EUR Unhurt by €Z production data

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