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30 days is the new two years

Setting a blistering pace

Prime Minister Boris Johnson made his first foray into Europe, visiting chancellor Angel Merkel in Berlin to insist that the Irish Backstop is unacceptable. The chancellor responded with what could have been a concession, a challenge or an ultimatum. Investors are uncertain of the implications for sterling, if any.

At a joint press conference, Ms Merkel said the "UK has to tell us what ideas it has" to solve the backstop issue and "it is not the job of the chancellor" to find a solution. Then came her concession/challenge/ultimatum: "We always said we would find a solution in the coming two years… But possibly you might find the solution in 30 days, why not?" Johnson said he welcomed the "blistering timetable" and that the "onus is on us".

Observed from the financial marketplace the exchange was inconclusive. Although Johnson's demand was not rejected out of hand, the likelihood of Britain coming up with an acceptable solution for the internal Irish border in less than a month can hardly be great. The Prime Minister will have another go today, this time with Emmanuel Macron in Paris. In the meantime, sterling is on average slightly lower on the day, down by 0.25% against the euro, yen and US dollar and flat against the franc.

Significant risks and uncertainties

The minutes of the Federal Open Market Committee meeting, which took place at the end of last month, were apparently not as dovish as investors had expected. After their release, the US dollar strengthened very slightly, leaving it almost flat on average against the other majors.

Although the FOMC eventually voted 8-2 to cut the funds rate by 25 basis points (the two dissenters preferring to leave it unchanged), in the prior discussion "a couple of participants indicated that they would have preferred a 50 basis point cut". All in all, the minutes did not alter expectations that another cut is coming next month.

Even though the Canadian dollar is steady on the day (and the week) against the  US dollar, it had a bit of excitement when the Canadian consumer price index numbers came out. Headline inflation at 2.0% was unchanged on the month and above the 1.7% forecast by analysts. The Loonie is nearly half a cent higher against sterling.  

Jackson Hole and Biarritz

Central bankers from America and around the world will be gathering today in Jackson Hole WY for the Kansas Fed's annual Economic Symposium. The keynote speaker tomorrow will be Fed chairman Jay Powell. On Saturday G7 leaders will convene in Biarritz for their 45th summit.

The Jackson Hole meeting usually throws up something to exercise investors. On this occasion they will be eager to hear Mr Powell's ideas about the US economy, how it is being affected by trade tensions and what he intends to do about it. As for the G7 meeting, those with an interest in sterling will watch how the Prime Minister gets on with the world leaders whose support he will need post-Brexit.

Ecostat-wise, today brings the provisional purchasing managers' index readings from Europe and the States and tomorrow's highlight is Canadian retail sales. Britain makes its contribution this morning with the CBI's Distributive Trades Survey of retail activity.

GBP: 30 days to find a Brexit solution

GBP: 30 days to find a Brexit solution

USD: Little consensus in the FOMC

USD: Little consensus in the FOMC

CAD: Above-forecast inflation

CAD: Above-forecast inflation

CHF: Steady against sterling

CHF: Steady against sterling

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