Daily Brief

Daily Brief

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Another day on the rack

Star-crossed sterling

You can tell things are getting desperate when the financial media resort to astrology. It was reported yesterday that "a stellium (grouping) of planets in Virgo suggests that the British pound will be under pressure through August and especially in the last days of that month".

Stelliums are the last thing sterling needs at the moment. It is doing badly enough already without hindrance from the stars. For a second successive day on Tuesday the pound was dumped unceremoniously by investors. It lost an average of 0.4% to the other major currencies, leaving it 1.1% lower on the week and down by 3.7% from the day Theresa May announced her resignation. The Conservative leadership contest has not been kind to the pound.

The my-Brexit's-harder-than-yours confrontation between Messrs Hunt and Johnson is at the heart of sterling's plight. That was made clear by the way investors studiously ignored yesterday's employment data. Unemployment remained at 3.8%, a 44-year low and wage growth continued to accelerate, widening the gap with inflation for a 16th consecutive month. All good stuff. And what did the Great British Pound do? In the following 90 minutes it lost half a US cent and it is down by twice that much on the day.

A long way to go

The US dollar came out on top despite - or because of - mixed US data and the president's comment that trade talks with China have "a long way to go". It strengthened by half a cent against the euro.  

US retail sales went up by 0.4% in June, both with and without motor cars. Sales for the control group, which figures in the personal consumption expenditures calculation, were up by 0.7%. Import and export prices were both lower on the month, imports by 0.9% and exports 0.7%. The NAHB Housing Market Index rose by an unexpected point to 65. Industrial production was less impressive: it was flat in June, as a decline in utilities offset increases for mining and manufacturing.

The only important data from Euroland were ZEW's surveys of investor confidence. Economic sentiment in Germany was three and a half points softer at -24.5 while the current situation collapsed nine points to -1.1. For pan-Euroland economic sentiment was roughly steady at -20.3.

Inflation all round

Most of the data on today's agenda relate to inflation. Britain, the euro zone and Canada will all be reporting on consumer prices for June.

Headline CPI inflation for Britain is forecast to be unchanged at 2.0% with the retail price index 2.9% higher on the year. Euroland inflation is pencilled in at 1.2%, also unchanged from the previous month. In Canada it is expected to have slowed from 2.4% to 2.0%.

Filling any gaps in the agenda are Euroland construction output, South African retail sales, US housing starts and building permit and Canadian manufacturing shipments. This evening the Federal Reserve publishes its Beige Book assessment of the US economy.

GBP: The wooden spoon collection grows

GBP: The wooden spoon collection grows

USD: Healthy retail sales

USD: Healthy retail sales

EUR: Investor confidence takes another knock

EUR: Investor confidence takes another knock

CAD: Inflation expected to slow

CAD: Inflation expected to slow

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