Daily Brief

Tell them what you’re going to tell them

Eat in to rein in

In Britain, the government spent Monday softening up the population for tighter anti-Covid restrictions. As the virus is threatening to flare up again, restrictions on pub opening times and meeting people indoors are expected to be re-introduced. The Prime Minister himself will spell out the details today.

It cannot have come as a shock, after the health secretary’s comments on Sunday, that Britain - and several other governments – are actively considering tighter restrictions. Even so, investors contrived to feign surprise, attacking UK share prices. The aggression quickly spread to other markets, such that equity indices almost everywhere moved lower on the day. That contagion helped to blur the focus on sterling, and it is on average unchanged on the day.

For different reasons the US dollar and Japanese yen came away with the best results. The dollar’s advantage was a growing fear that November’s presidential election will be messy, with the incumbent only accepting the result if he wins. Even though it sounds counter-intuitive, such uncertainty tends to work in the dollar’s favour. The JPY took second place, on the mark-down of equity prices, and the CHF came third by the same logic.


Powell on the Hill

As Downing Street revealed the gist of today’s speech by the Prime Minister to the media, the Federal Reserve published a verbatim account of what chairman Powell will tell the House Financial Services Committee today. He will be joined by treasury secretary Steve Mnuchin.

Mr Powell’s prepared speech springs no surprises. It summarises what the Fed has done, and is doing, to provide support to households, businesses and local government. The crucial bit comes at the end when Mr Powell says “Thank you. I look forward to your questions”. The chairman would be missing a trick if he were not to remind the House – which is already onside - that the country still awaits the fiscal stimulus package that it was expecting last month. It will be a tougher sell tomorrow when he tells the same story to the Senate.

The sneak peek at Mr Powell’s testimony was just about the only useful item on Monday’s agenda. Canada’s new housing price index showed prices rising at their fastest pace since May 2017. The Chicago Fed’s National Activity Index suggested “slower but still above-average growth in August”. European Central Bank president Christine Lagarde helpfully observed that “the strength of the recovery remains very uncertain”.


Powell and Johnson

Another short agenda today leaves the Fed chairman and the UK Prime Minister as the only real highlights. Even with them, the excitement is dulled by the pre-release of their comments.

Reserve Bank of Australia assistant governor Guy Debelle had a go at talking down his currency this morning, and was at least briefly successful. He told the AiG that “a lower exchange rate would definitely be beneficial for the Australian economy”. It was hardly a revelation but at least it confirms the RBA’s view. Another central Banker, the Old Lady’s Andrew Bailey, will be speaking this morning.

Ecostats are few. The CBI will print its Industrial Trends Survey this morning. After lunch come US existing home sales, the Richmond Fed’s manufacturing index and Eurozone consumer confidence.

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