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Quiet summer days

Lacking confidence

With no hard economic data to advise them, investors had to rely on the results of assessments and surveys from Germany and the United States. None of them was uplifting and all cast a shadow over manufacturing activity. 

First up was Germany's IFO, with its business confidence measures. They were not an unmitigated picture of gloom, at least in two of the four sectors: "In trade [consumer sales] the index rose. Companies were… more confident about the coming months"; "In construction, the business climate index fell, but remains at a high level. However, "In manufacturing, the business climate index fell once again" and "In the services, the business climate worsened".  

In the States the Chicago Fed's National Activity Index (CFNAI) improved from -0.48 to -0.05. It was a better result than expected but still negative and therefore indicating below-trend growth. The Dallas Fed's manufacturing index did not improve at all, falling seven points to -12.1. The report spoke of outlooks worsening and uncertainty rising. A supplement showed that protectionist tariffs had increased prices, reduced profits and had a net negative effect on all aspects of business.

Brexit planning

Would-be Conservative leader Boris Johnson briefly broke cover to talk to the BBC about his Brexit plans, though not about the infamous shouting match on Thursday night. Although his vision was lacking in detail he did not appear to be pushing for a no-deal Brexit.

The essence of Johnson's thinking is that "politics has changed so much since 29 March", when Theresa May's Withdrawal Agreement was defeated for a third time in parliament. He was optimistic about the Irish border ("abundant technical fixes") and anticipated cooperation from the EU to avoid tariffs in the event of no-deal.

It is not clear whether or not investors swallowed his story. Sterling held steady against the US dollar but lost a third of a euro cent and one Swiss cent. The Swissy was the day's top performer, once again coming out as the safe-haven of choice but also losing ground to gold, which went up by 2.4% against the dollar.

Hoping for something

As on Monday, today's agenda is not an obvious source of inspiration. The only genuinely important item is the Reserve Bank of New Zealand rate announcement tonight, though technically that is on tomorrow's list.

Today began with New Zealand's balance of trade, and a smaller-than-expected surplus in May. Next comes the Swedish producer price index, followed by the CBI's Distributive Trades Survey of UK retail sales. After lunch Canada reports on wholesale sales and America generates a handful of house price indices. There will also be the finalised Conference Board consumer confidence figure and the Richmond Fed's manufacturing index.

The expectation is that the RBNZ will keep its Official Cash Rate unchanged at 1.5% and acknowledge that a cut is possible in the future. A survey of 24 economists found all of them going for no change today but some of them have "a sneaking suspicion" that the central bank could deliver a surprise cut.

GBP: Johnson confident of Brexit deal

GBP: Johnson confident of Brexit deal

EUR: German business confidence softens

EUR: German business confidence softens

USD: Tariffs bad for business

USD: Tariffs bad for business

CHF: Again the safe-haven of choice

CHF: Again the safe-haven of choice

NZD: Rate decision tonight

NZD: Rate decision tonight

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