Daily Brief

Daily Brief

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The great reveal

All chaff, no wheat

The US dollar was top of the shop on Monday, strengthening by an average of 0.3% against the other major currencies and by half a cent against sterling. There was no urgency about any aspect of the FX market and the pound covered a range of less than half a cent against the euro and US dollar.

An almost event-free agenda gave investors little to shoot at. The most obvious target was May's 1.8% monthly fall in Canadian wholesale sales. Analysts had forecast a 0.5% increase so investors took a dim view of the unexpected and sharp decline. Following the release of the data, the Loonie moved steadily backwards, eventually losing a third of a cent to sterling and two fifths of a US cent.

The Chicago Fed's National Activity Index was reassuring, if not exactly inspiring. For June the reading was -0.02 after -0.03 in May. A figure of zero would represent trend growth and the Fed's summary was that the "Index points to Economic Growth near Historical Trend in June". The only other even vaguely statistical item was the Bundesbank's Monthly Report. The German central bank sees employment rising in the next three months as a result of weakness in manufacturing and exports and it suspects that gross domestic product shrank in the second quarter.

Sterling caution

Where the Bundesbank worries about the German economy, the National Institute of Economic and Social Research has reservations about Britain. The forecasts it released yesterday note "a one-in-four chance that the economy is already in a technical recession".

The NIESR was not optimistic about the effect of Brexit: "On the assumption of an orderly no-deal Brexit, the economy is forecast to stagnate, before starting to grow again in 2021." With a new Prime Minister due to take office tomorrow who has either embraced or accepted the idea of no deal, investors were not inclined to fill their boots with sterling. Yet neither did they go out of their way to sell: it is an average of 0.1% lower on the day.

Unconventional RBNZ

Today's agenda is twice as busy as yesterday's in that it contains six, not three, sets of economic data. Ahead of those numbers, the Reserve Bank of New Zealand has put a bit of a torch to the Kiwi with news that it is refreshing its "unconventional monetary policy strategy".

Although there was no suggestion that the RBNZ has any action in mind for the immediate future, the mere fact that it is considering (presumably) quantitative easing was enough to send the NZ dollar a few steps to the rear. It is half a cent lower on the day against sterling.

Today begins with paperwork: the European Central Bank's lending survey and the Bank of England's Financial Policy Committee minutes. Then comes the announcement, around midday, about the next prime minister, closely followed by a speech from BoE chief economist Andy Haldane. US existing home sales and the Richmond Fed's manufacturing index come out after lunch, along with the EC measure of Euroland consumer confidence. Tonight New Zealand reports on June's balance of trade.

GBP: New PM name to be revealed

GBP: New PM name to be revealed

USD: Leader for the day

USD: Leader for the day

CAD: Wholesale sales disappoint

CAD: Wholesale sales disappoint

EUR: Bundesbank cautious on employment

EUR: Bundesbank cautious on employment

NZD: RBNZ considers unconventional measures

NZD: RBNZ considers unconventional measures

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