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Prorogation

Enjoyable and productive

The Prime Minister's letter to MPs took them - and investors - by surprise. His decision to shut down Parliament for five weeks sparked an outburst of admiration from Brexiteers and condemnation from those seeking to prevent no-deal. Sterling plunged a cent before making back some of its losses.

It is easy enough to justify the initial dump. The prorogation of Parliament to prevent MPs obstructing a no-deal Brexit makes that outcome more likely, and it is not a prospect that investors relish. As for the pound's subsequent upward correction, two or three aspects could be less dire than they initially seemed. The prorogation will only remove half a dozen days from the Commons' usual schedule. If the anti-no-deal group can get its act together - by no means guaranteed anyway - it will doubtless receive sympathetic consideration from the speaker, who described Johnson's move as a "constitutional outrage".

Almost inevitably, the pound was forced into last position on the day. It was no whitewash though: the NZ dollar and Swedish krona were only ahead by a whisker and the biggest loss was one yen to the safe-haven Japanese currency. Compared with Tuesday morning's levels, sterling is still fractionally ahead against all but the US dollar.

Watching and waiting

Two regional Federal Reserve presidents were on the media record on Wednesday. They both favoured monitoring the economic data while leaning in different directions on policy.

In a speech in New Zealand, San Francisco's Mary Daly favoured running the economy "hot", keeping rates low despite a risk of consequent financial instability that she does not see as "acute". Thomas Barkin, head of the Richmond Fed, said he was not yet convinced that persistently weak inflation was sufficient reason to cut rates. Mr Barkin is currently a voting member of the Federal Open Market Committee; Ms Daly is not. The US dollar is three quarters of a cent higher against sterling and unchanged against the euro.

Wednesday's economic data were unremarkable. Business confidence in Switzerland softened in August, with ZEW's Expectations down from -24 to -37.5. ANZ's Business Outlook summarised the situation in New Zealand as "Nothing good to say about it".

More chaff than wheat

There is no shortage of ecostats between now and the end of the month but few of them are top-tier indicators. The ones to watch are (revised) US second quarter GDP today and Euroland inflation and Canadian Q2 GDP tomorrow.

America's economy is said to have expanded at an annual pace of 2.0% in Q2, a quarterly expansion of 0.5%. That would be slightly less than the original estimate of 2.1%. No change is expected to euro zone inflation: the provisional figure for August is forecast to be unchanged from July's 1.0%. Canadian second quarter GDP is predicted to show annualised growth of 3.0%, a quarterly 0.7% expansion.

Data from the UK tonight and tomorrow cover consumer confidence, Nationwide house prices and the Bank of England's lending and money supply figures. Expect to be bombarded with speculative punditry about how prorogation will affect the Brexit outcome but try not to place too much reliance on any of it…

GBP: Prorogation bombshell

GBP: Prorogation bombshell

USD: More Fed disagreement

USD: More Fed disagreement

CHF: Business confidence softens

CHF: Business confidence softens

NZD: Downbeat business survey

NZD: Downbeat business survey

EUR: Inflation data tomorrow

EUR: Inflation data tomorrow

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