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Brexit worries again

Looming cliff edge

It would be an over-generalisation to say that sterling went down on Monday while the other major currencies stayed the same. Even so, it would be close enough to the truth to give the general idea of how the day panned out. It was another easy wooden spoon for the pound.

The falling Rightmove house price index was not to blame. That was already long gone by the time London began to lean on sterling. There were no other UK economic statistics to hurt it. But there was nothing new on the Brexit front either, and that is apparently where the problem lay. Both prime-ministerial wannabes have embraced the no-deal philosophy and want to abandon the Ireland "backstop". The options for Parliament to thwart a determined cliff-edge departure from the EU are apparently uncertain to succeed.

No consolation for investors there, then, and they probably did not give much credit to a cross-party paper - " Six Dead Ends, One Cliff-Edge, Only One Way Out" - calling for a six-month extension to Article 50. So down went the pound. The discussion in dealing rooms yesterday was not about whether to sell the pound, but about which currency to sell it against.  

A win for New Zealand

The two currencies leading the way on Monday were the NZ dollar and Swedish krona. For the krona it was just the luck of the draw. For the Kiwi it was the quarterly inflation data released overnight.  

Consumer prices in New Zealand rose 0.6% in the first quarter and were up by 1.7% on the year. Because the numbers were exactly in line with forecast, and inflation had gone up from its previous print at 1.5%, investors saw no reason to worry about any easing of Monetary policy.

The minutes of July's Reserve Bank of Australia policy discussion also came out overnight. They appeared to confirm the possibility of a further rate cut late this year or early in 2020. There was no reaction from the Aussie.

A busy agenda

There is something for everyone on today's list - UK jobs, Euroland confidence, US retail sales and output. There will also be appearances by the Bank of England governor, the regional Fed presidents and the chairman of the Federal Reserve himself.

Analysts expect more of the same from the UK employment data; unemployment steady at 3.8% and wage growth comfortably outpacing inflation. ZEW's measures of German and euro zone investor confidence will do well not to weaken further. US retail sales and industrial production are both forecast to have risen 0.2% in June, with capacity utilisation steady at 78.1%. The NAHB housing market index is supposed to be unchanged at 64.

Mark Carney is due to appear at one o'clock, followed the Atlanta Fed's Raphael Bostic and Fed Governor Michelle Bowman. Jerome Powell will be talking about aspects of monetary policy in the post-crisis era.

GBP: Down across the board

GBP: Down across the board

NZD: Inflation in line with forecast

NZD: Inflation in line with forecast

SEK: Shares lead with Kiwi

SEK: Shares lead with Kiwi

AUD: Unaffected by RBA minutes

AUD: Unaffected by RBA minutes

EUR: Investor confidence today

EUR: Investor confidence today

USD: Awaits Fed chairman's speech

USD: Awaits Fed chairman's speech

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