Sterling needs a Stokes
The long weekend was less kind to sterling than the previous few days had been. Optimism generated by the British Prime Minister's cordial meetings with German and French leaders faded in Biarritz, especially after renewed talk of forcing through a no-deal Brexit. On average sterling starts the week below Friday morning's levels.
Sterling survived almost unscathed the only UK ecostat at the end of last week. That was something of a relief, as the CBI's Distributive Trades Survey on Thursday looked particularly unpleasant. The reading fell 33 points, down by 49% in August, its lowest level in nearly 11 years. The report noted that "sentiment is crumbling among retailers".
Investors were more interested in the reception accorded to Boris Johnson by Angela Merkel and Emmanuel Macron. Both apparently gave him 30 days to propose a workable alternative to the Irish Backstop. Everybody got terribly excited about a possible Brexit deal and the pound moved higher, squeezing out some short positions. Over the weekend, as Johnson continued to punt the idea of shutting down parliament, reality was restored and the pound was mostly lower on Monday.
It was not only Britain's Prime Minister who befuddled the media and markets at the G7 summit in Biarritz. The US President continued to contradict himself about the trade negotiations - or not - with China. A strongly risk-off attitude on Friday was only partially corrected yesterday.
That partial correction meant Friday's currency leader, the Japanese yen, was replaced on Monday by the Canadian and Australian dollars. Over the long weekend as a whole, the yen was still the overall winner, strengthening by 0.9% against sterling. Second place was shared by an unlikely couple; the safe-haven Swiss franc and the supposedly risky Canadian dollar. Sterling lost an average of 0.3% over the four days.
In Friday's provisional purchasing managers' index readings, the numbers from Europe all exceeded forecast while the US figures disappointed. The boot was on the other foot yesterday. Ifo's survey of Germany companies found them increasingly pessimistic, with the index falling for the 11th time in 12 months. On Monday afternoon, the US Census Bureau reported that durable goods orders went up by 2.1% in July and that nondefense capital goods orders ex-aircraft rose 0.4%. Both numbers were well ahead of forecast.
After the long weekend, there is not much on today's programme to reawaken investors' enthusiasm. Germany's revision to second quarter GDP this morning did not move the dial away from a 0.1% contraction. French consumer confidence was unchanged at 102.
Sweden's producer price index, trade surplus and capacity utilisation measures are the only ecostats from Europe. The BBA reports on UK mortgage approvals by its members in July.
After lunch there are two house price measures from the States; the Case-Shiller house price index from Standard and Poor's and the housing price index from the Federal Housing Finance Agency. The Conference Board publishes its consumer confidence figure and the Richmond Fed its manufacturing index.