Daily Brief

Not Jackson Hole

Picking up scraps

Currencies were a little more adventurous on Wednesday, with 1.1% separating the leading NZD and NOK from the trailing USD. It was still by no means a big day for the FX market though, with sterling once again all but unchanged on average. It added three quarters of a US cent and two fifths of a euro cent.

There were no UK economic data to shape the pound. An auction of gilts showed that the government can borrow ten-year money at 0.323%, offering a degree of reassurance to those who worry about the cost of funding the growing deficit. There were bids of £7.4 billion for the £2.75 billion on offer.

There was nothing among the rest of the economic news or data to excite investors. Swiss business confidence at 45.6 was 91 points up from its March low and not a mile away from its ten-year high of 52. It did not help the CHF, which was half a cent lower on the day. US durable goods orders, which in the olden days used to have investors on the edge of their seats, had minimal impact even though the components all met or exceeded forecast. Overall orders were up by a monthly 11.2%, having been expected to rise 4.3%.

 

Meadows lark

Having taken durable goods orders in its stride the US dollar was totally unprepared for the pratfall that befell it a couple of hours later. White House chief of staff Mark Meadows told an interviewer that he is “not optimistic” about cross-party agreement on a new fiscal stimulus bill.

Mr Meadows claimed that some reaching out had been going on between his people and House speaker Nancy Pelosi’s people but Ms Pelosi has so far stuck to her bargaining stance: she will cut a trillion dollars off the House’s demand if the administration will add a trillion to its own offer. The USD reacted badly to Mr Meadows’s lack of optimism and it became the day’s weakest performer.

Under the any-other-business heading, EU trade commissioner Phil Hogan resigned after being called out for a breach of Covid etiquette. His departure puts a spoke in the wheel of negotiations with the United States and Britain. Separately the UK Prime Minister has appointed former Australian Prime Minister Tony Abbott to a senior trade role. His appointment is not without controversy.

 

Hotter than a pepper sprout

At the top of the agenda for the rest of the week is the Federal Reserve Bank of the City of Kansas (which is not in Kansas, but in Missouri) and its annual Jackson Hole Economic Symposium, which is not in Jackson Hole, but on YouTube.

In Covid-safe mode, this year’s symposium will take place online. Virtual or not, the event has some high-powered participants. The speakers today include Fed chairman Jay Powell, Nobel laureate Ken Rogoff, ECB chief economist Philip Lane and BoC governor Tiff Macklem. They are followed tomorrow by BoE governor Andrew Bailey and OECD chief economist Laurence Boone.

The economic data will continue to flow. Today there are second quarter GDP figures from Switzerland (-8.2%) and the States as well as Swedish retail sales, and Italian industrial orders and sales. Tomorrow there is a bunch of confidence measures from New Zealand, Europe and the US, plus Canadian second quarter GDP and the Chicago purchasing managers’ index.

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