Daily Brief

Plenty to see

But not much to work with

There was plenty to entertain investors at the end of last week and over the weekend, if not among the economic statistics then at least in the general news feed. Four central banks had something to say. And yet more controversy attached itself to the US election.

The Federal Reserve chairman said once again that he is “not even thinking about thinking about” higher interest rates. In London, however, it transpired on Thursday that the Bank of England is entertaining the idea of negative interest rates. The news hurt sterling at the time but did not carry over to Friday, when it was on average unchanged. The South African Reserve Bank did as expected, keeping its repo rate steady at 3.5% for a third month. This morning the People’s Bank of China also left its benchmark rate unchanged at 3.85%.

At the end of the week, the death of US Supreme Court Judge Ruth Bader Ginsburg put a cat among the pigeons ahead of November’s election. The president wants to replace her immediately with his own nominee: the Democrats have cried foul, because the Republican Senate, under similar circumstances, denied Barack Obama his own pick much further ahead of the 2016 election. The situation has no immediate impact on the USD but the outcome could have implications further down the line.

 

Retail sales

On Friday, the UK and Canada both reported on retail sales; Britain for August and Canada for July. The UK data were a little better than forecast, the Canadian numbers not so much. In Britain the prospect of a renewed anti-Covid lockdown looms.

UK retail sales increased by 0.8%, for a fourth successive month of growth. Sales were 4.0% above February’s pre-pandemic level. Canadian retail sales increased by 0.6% in July, led by motoring-related spending. “Overall, the recovery in total retail sales has been V-shaped.” Sales of a different sort took Rightmove’s house price index 0.2% higher in September for a 5% annual rise. Rightmove’s report notes a number of new factors, including thwarted holidaymakers moving house instead of going abroad.

At a more practical level, Britain is bracing itself for a tightening of anti-Covid restrictions. Despite Police Minister Kit Malthouse’s launch of a shop-your-neighbour scheme last week, Health Secretary Matt Hancock said yesterday that the virus is “at a tipping point” that could result in a new national lockdown. No such new lockdown is yet priced into sterling.

 

The nights are drawing in

The autumnal equinox will probably go unnoticed in the FX market (except in Japan, where it will mean a second bank holiday after today’s respect-for-the-aged day). It might not, however, improve the mood of sterling as the days tick down to a potential no-deal Brexit.

There are no UK economic data on todays’ agenda. Tomorrow brings the CBI’s Industrial Trends Survey and Bank of England governor Andrew Bailey’s participation in a British Chambers of Commerce webinar. The provisional purchasing managers’ index readings come out on Wednesday. On Thursday the CBI publishes its Distributive Trades (retail sales) Survey. On Friday, GfK reports on UK consumer confidence and the ONS on public sector borrowing for August.

Ecostats from elsewhere are almost as scarce today. NZ credit card spending is already out, down by 11.9% on the year. The Chicago Fed’s National Activity Index comes out after lunch, alongside Canada’s New Housing Price Index. Three speakers from the US Federal Reserve will make an appearance: Lael Brainard, John Williams and Chairman Jerome Powell.

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