Daily Brief

Daily Brief

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Brexit decisions coming up

Yes but no but

Lots of central banks were making no change to monetary policy at the end of last week. None felt the urge to follow the lead of the US Federal Reserve in taking rates lower. The Bank of England's minutes contained the usual constructive ambiguity about what happens next.

The Monetary Policy Committee hedged its policy bets once again because it is no wiser than anyone else what will become of Brexit. "In the event of a no-deal Brexit… the monetary policy response would not be automatic and could be in either direction", while if Britain were "on a path to a smooth Brexit, and assuming some recovery in global growth… increases in interest rates, at a gradual pace and to a limited extent, would be appropriate". Importantly, "in all circumstances, the Committee would set monetary policy appropriately to achieve the 2% inflation target".

There was little reaction by sterling to the Old Lady's fence-sitting but the pound did have a good day on Thursday, leading the other major currencies with an average gain of 0.5%. The upward thrust came from Downing Street's claim that it had put forward new proposals to Brussels.

Retail sales stall

The UK retail sales data for August were disappointing, even compared with investors low expectations. Canadian retail sales for July also fell short of forecast but at least managed a monthly increase.  

A 0.2% decline in UK sales failed to match the predicted 0.0% change but the fall was offset by an upward revision to the previous month from +0.2% to +0.4%. The Canadian numbers had no impact on the Loonie, which was in the front half of the pack on Friday with a gain of almost one cent against sterling.

The remainder of Thursday's and Friday's data were of only minor significance. US existing home sales went up 1.3% in August. Japanese inflation halved in August, from 0.6% to 0.3%. Euro zone consumer confidence improved by half a point to a provisional -6.5, according to the European Commission.

Mostly PMIs

The global focus today will be on the preliminary purchasing managers' index readings from Europe and the United States. Domestically, attention will turn to the Labour conference and the decision it makes regarding the party's official stance on Brexit.

This morning's PMI data from Australia told a familiar story, with the manufacturing sector in decline while services continue to grow. The picture in France was less clear-cut: services and manufacturing both expanded in September, though at 50.3 the manufacturing PMI was only barely positive. Other data today cover Canadian wholesale sales and the Chicago Fed's national activity index.

Brexit will occupy its usual position on the front pages as the Labour Party debates whether to back a "public vote" or to support the NEC's proposal to postpone the decision. It is also possible that the Supreme Court will deliver its verdict on the legitimacy of the prorogation of Parliament.

GBP: Bank of England hedges bets

GBP: Bank of England hedges bets

CAD: Retail sales disappoint

CAD: Retail sales disappoint

JPY: Inflation slows to 0.3%

JPY: Inflation slows to 0.3%

AUD: Services up, manufacturing down

AUD: Services up, manufacturing down

EUR: More manufacturing gloom

EUR: More manufacturing gloom

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