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Daily Brief

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Stay of Brexecution

Lower chance of no deal?

A million marchers here, five million petitioners there , and all of a sudden Downing Street is looking at real statements of public opinion. Whether or not it chooses to dwell upon them is up to Theresa May and her supporter. But investors see it as another nail in the coffin of a no-deal Brexit.

After a major wobble on Thursday morning the pound returned to an even keel in the evening when Theresa May returned from Brussels with the EU's approval of a delay to Article 50. It was not the three months she had asked for: more like a fortnight unless she can get parliament to sign up for her withdrawal agreement. That was enough for investors though, who see the postponement as an opportunity for parliament to cobble together what they imagine will be a soft Brexit.

Compared with Thursday's opening levels sterling is firmer by an average of 0.6% and down only against the Japanese yen. Over the last month is an average of 1.5% higher, 0.2% ahead of its closest competitor.

Trouble at the German mill

It was the euro's turn to take the flak on Friday, after the provisional purchasing managers' indices came out. Germany's services sector looked alright at 54.9 but the manufacturing PMI looked deeply unpleasant at 47.6. The euro took a dive and its ripples swamped the commodity currencies and Scandinavian crowns.

Although it was the German number that hogged the headlines the French PMIs were not much good either, at 49.8 (manufacturing) and 48.7 (services). The United States equivalents were 52.5 and 54.8, both lower on the month and below forecast.

The German statistic had an immediate effect on equity markets and share prices fell across a broad front. That meant increased demand for US Treasuries, which led to the yield of a 10-year bond falling below that of a three-month bill. This "yield curve inversion" , where short-term returns are higher than long-term, is seen by many as a portent of recession.  It coincided with the yield on 10-year German bunds going below zero: investors pay the government to borrow their money. Not surprisingly, the currency best placed to take advantage of all this was the yen, which led the second-placed British pound by 0.3%.

Meaningless votes

After several days' hiatus the pace should pick up again in the House of Commons today. Parliament has 18 days to pull something out of the fire in order to avoid the no-deal Brexit which it has already rejected.  Unfortunately, without the prime minister's imprimatur any votes will only be advisory, and thus ultimately meaningless.

To muddy the waters further, the Conservative party is said to be keen to replace Theresa May as prime minister. It is not clear what advantage that might afford to the Brexit process: Entrenched opinions are not easily changed.

There is nothing of real consequence on today's ecostat agenda. So tune in to BBC Parliament and enjoy the fun.

GBP takes second on soft Brexit hopes

GBP takes second on soft Brexit hopes

USD in third as yield curve inverts

USD in third as yield curve inverts

EUR hurt by slowdown in Germany and France

EUR hurt by slowdown in Germany and France

JPY leads as investors take cover

JPY leads as investors take cover

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