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More Brexit woe for sterling

Up and down the country

As the prime minister visited Wales and Northern Ireland to promote her Brexit bill she refuted the US president's claim that it would prevent bilateral trade with America. Her dismissal of Trump's accusation was not enough to soothe investors, who took sterling lower on all fronts.

From what they know at the moment, investors could broadly see four possible short-term outcomes from the Brexit imbroglio: the successful passage of Mrs May's bill, a second referendum, a general election or a no-deal Brexit.  Unfortunately the one that would be most helpful to sterling - parliamentary approval of the bill on 11 December - is the outcome that appears least reachable on the decision tree.

The pound was not smashed on Tuesday; the euro and the Canadian dollar were only narrowly ahead and its biggest loss, to the NZ dollar, was well under 1%. But the concerns are clear. More than one faction in Westminster believes that to defeat the bill would be to advance its own cause, either towards a better deal, no deal, a general election or a referendum. The risk is that, together, they accidentally deliver the no-deal favoured by only a tiny minority and feared by most. 

Clarida's call

Much as theological scholars pore over religious texts to discern exact meaning, economists scrutinise central banks' written and oral statements to find out what has changed. The thought they had come up with something yesterday when the vice chairman of the Federal Reserve didn't say "some".

Richard Clarida said in a speech that he supports "gradual policy normalisation".  Pedants spotted that the last time he touched on the subject, a month ago, he spoke of  "some further gradual adjustment". One interpretation is that Mr Clarida's omission of the limiter "some" implies a more hawkish stance.

If so, it will not go down well with the US president. Trump told an interviewer yesterday that he is "not even a little bit happy" with Fed chairman Jay Powell, whom he blames for everything from lower equity prices to General Motors' factory closures. The Fed is nevertheless expected to press ahead with a rate increase next month and at least one more in 2019.

Financial stability

The Bank of England will release its biannual Financial Stability Report today. Governor Mark Carney will hold a press conference this afternoon to discuss it. Investors will be interested in the economic assumptions which it uses, and their implications for sterling.

Ahead of the report, it is safe to assume that its no-deal scenario will look considerably more chilling than the least-damage option of the prime minister's deal. Whatever the details, the full effect of the report will not become apparent until the governor appears at 16:45.

The US gross domestic product data for the third quarter come out after lunch. Analysts expect annualised growth to be 3.5%, unchanged from the provisional figure a month ago. There will also be US data for wholesale inventories, the trade deficit and new home sales.

GBP brings up the rear after Trump stirs Brexit fray

GBP brings up the rear after Trump stirs Brexit fray

USD well-placed after positive Fed assessment

USD well-placed after positive Fed assessment

EUR only fractionally ahead of sterling

EUR only fractionally ahead of sterling

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