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Daily Brief

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Do or die

On the buses

Sterling was taken for a ride on Tuesday by Tory leadership candidate Boris Johnson. He created more alarm among investors with a challenge to opponent Jeremy Hunt and rambling radio interviews. The pound lost an average of 0.3%, giving up three quarters of a US cent while remaining almost unchanged against the euro, yen and Swiss franc.

Mr Johnson told an interviewer that Britain would leave the EU on 31 October "come what may, do or die" and all that was needed for success was "positive energy". He challenged Mr Hunt to match his 31 October pledge. Mr Hunt declined, calling it a "fake deadline" and warning that pursuit of it would risk a general election and a Corbyn government. Investors did not like the sound of either.

In a surreal sidebar, Mr Johnson said his idea of relaxation is to make models of low-carbon buses out of old wooden crates, complete with happy passengers. There was no mention of what he writes on their sides. So far, neither contender has been able to persuade investors that he has - or will ever have - a viable Brexit plan, hence the nervousness about no-deal.

Chickens and doves

The erosion of economic morale continued with the US Conference Board's consumer confidence index. It was exacerbated by two Federal Reserve bosses playing down the market's wildest expectations for swingeing rate cuts. Equity prices and bond yields fell: the US dollar nudged higher.

US consumer confidence fell 10 points in June to 121.5, its lowest level since September 2017, and new home sales were down by 7.8% in May. The other US data were less downbeat. House prices went up by 0.4% in April for an annual rise of 2.5%. Importantly, the Richmond Fed's manufacturing index was little changed in June, breaking a run of dismal readings from other Fed districts.

Overnight the Reserve Bank of New Zealand announced an unchanged 1.5% Official Cash Rate. Although the statement noted that "a lower OCR may be needed", the Kiwi got a lift because there was no "surprise" cut. It - together with the Aussie - is a cent and a fifth firmer against sterling.

The Old Lady's crew

Bank of England governor Mark Carney and three of his MPC members will give evidence to parliament's Treasury Committee this morning. Although the stated topic is the bank's inflation report, it is possible that the discussion might stray onto the subject of Brexit.

Consumer confidence readings this morning from Germany and France were inconclusive. In Germany it was touch softer, in France a smidgen higher. There is nothing more due from Europe beyond BBA mortgage approvals, a subset of the whole UK mortgage picture, and Swiss business confidence.

The US data cover the trade deficit, wholesale inventories and the capricious durable goods orders. After falling 2.1% in April, orders are forecast to have increased by 0.2% in May. Nondefense capital goods orders ex aircraft are expected to be just about flat.

GBP: BoE governor to testify on inflation

GBP: BoE governor to testify on inflation

USD: Fed plays down rate cut hopes

USD: Fed plays down rate cut hopes

NZD: RBNZ hints at rate cut but does not deliver

NZD: RBNZ hints at rate cut but does not deliver

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