Sterling has climbed to the highest point against the Euro since May 2017 over the increasing likelihood of a Brexit delay. This has followed reports that that Prime Minister Theresa May will propose formally ruling out a no-deal Brexit and delay the exit from the European Union.
No-deal is still a possibility, not least because the prime minister says it is. But the pressure on Theresa May to abandon that option is growing irresistible. Yesterday, opposition leader Jeremy Corbyn gave his backing to a second referendum if his own proposal fails to win parliament's approval. This morning's headlines suggest that the prime minister might rule out a no-deal Brexit when she addresses parliament today.
The next concession would logically be a delay to the 29 March deadline, if only because the 31 days between now and then give insufficient time to complete the necessary housekeeping. There could be an announcement on that in parliament today too. So the Brexit uncertainty continues but the possible outcomes have become less worrying to investors.
The American version
The White House has a couple of balls in the air at the moment: trade talks with China and the Kim-Trump summit to discuss the denucularization of North Korea. Lately, even the administration has been playing down the likely success of those two efforts.
Trump meets tomorrow in Hanoi with the world's most famous gricer, Kim Jong Un, who has spent the last three days chugging across Asia in his antique train set. Expectations for a deliverable breakthrough are low.
More importantly, the trade talks with China are perhaps not heading towards the win/win result investors had hoped for. In particular, US energy exports to China have been diminished by the trade war and would take time to recover following a deal. The mixed messages left the US dollar unchanged on average, half a cent lower against sterling and roughly steady against the euro.
Carney, May and Powell
Economic data were few on Monday and will be slightly more numerous today, if not necessarily any more enlightening. For sterling the appearances of Mark Carney and Theresa May will be key. For the US dollar it will be Jerome Powell's testimony to Congress.
It was erroneously reported here yesterday that the Bank of England governor would be speaking to parliament's Treasury Committee about the Inflation Report. That meeting in fact takes place today: Mark Carney's outing on Monday concerned derivatives clearing. This afternoon Federal Reserve chairman Jay Powell answers questions from the Senate Banking Committee and he will repeat the process tomorrow with the House Financial Services Committee.
Sterling's day should become more interesting around half past twelve, when the prime minister is expected to make her appearance in the House of Commons. A lot of emotion will by then have been invested in a no-no-deal commitment and a postponement of 29 March. So if the prime minister continues to push for my-deal-or-no-deal sterling would have to take a step back.