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The next debate

A trouble shared

The Australian dollar sportingly intervened to protect sterling from another wooden spoon. There was no more than 0.1% - quarter of an Australian cent - in it: the only difference was that the Aussie spent the whole day on the retreat while the pound's losses came in the afternoon and overnight.

Predictably, sterling's Achilles heel was Brexit. The particular fear is that the prime-minister-in-waiting will somehow manage to force Britain to trade on WTO terms after the end of October. Financial analysts put the chance of a no-deal Brexit at around 4/1 while the bookies see it at closer to evens. Neither of those odds makes the pound look appealing to investors. Its average loss on Monday was 0.4%. Against the safe-haven yen and Swiss franc, which shared the lead, it was down by 0.7%.

Until this morning the Aussie's problems were the economy, interest rates and trade wars, not necessarily in that order. The minutes of the Reserve Bank of Australia's policy meeting on 4 June added another to that list, taking the currency close to a ten-year low against the USD. In the minutes the RBA said another rate cut is "more likely than not".

NY Fed "shock"

Most of Monday's few economic statistics were unremarkable. One was not:  The New York Federal Reserve's manufacturing index crumpled from 17.8 in May to -8.6 in June, a 26-point drop and the largest in the history of the survey.

Although the NY Fed's number was considerably worse than the forecast 10.0, investors determined to wish it away. They decided the survey responses must have been swerved by the US president's threats of tariffs on Mexican imports, made a week earlier. The US dollar is only a nose behind the euro and level with the Canadian dollar, half a cent higher against the pound.

Investors were equally ready to brush off comments by commerce secretary Wilbur Ross. Mr Ross dismissed the idea of a China trade agreement at this month's G20 meeting and said Trump is "perfectly happy" with cranking up the tariffs again. He is even "giving very serious thought" to the idea of imposing tariffs on all car imports.

Carney, Draghi and Johnson

The important things today will be words, not numbers. The Bank of England's Mark Carney and the European Central Bank's Mario Draghi will both be speaking at the ECB Forum in Sintra, Portugal. Boris Johnson will be among the Tory leadership candidates appearing in a televised Q&A on BBC1 at 20:00h.

Of the three, Mr Carney is least likely to affect exchange rates. With only six months until he steps down as governor, and with Brexit still polluting the financial environment, he is unlikely to come out with anything contentious. Mr Draghi might, especially if he picks up on an observation by his possible successor, Olivier Blanchard, that fiscal tools will be needed to fight the next downturn.

Mr Johnson is unlikely to upset sterling's applecart deliberately. He could hurt the pound, though, if he endorses the idea of no-deal. It is difficult to imagine any upside.

GBP: No-deal Brexit fears

GBP: No-deal Brexit fears

AUD: Prospect of further rate cuts

AUD: Prospect of further rate cuts

USD: Unhurt by plunging NY activity

USD: Unhurt by plunging NY activity

JPY: Shares lead with CHF

JPY: Shares lead with CHF

EUR: Narrowly ahead of GBP

EUR: Narrowly ahead of GBP

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