Daily Brief

Daily Brief

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Only 93 selling days to Brexit

Scorched earth

If the intention of the government was to make the pound more competitive ahead of a no-deal Brexit, it has been stunningly effective. The story yesterday was that the only alternative to no deal was the EU's capitulation on the Irish backstop, an unlikely outcome as long as the Prime Minister refuses to talk to Ireland's Taoiseach.

Friday was a difficult day for the pound. Monday was a shocker. It lost an average of 2.1%, falling to a 28-month low against the US dollar and a 22-month low against the euro. It would be redundant to list again the reasons why investors see Brexit as being detrimental to the British economy and the pound: they have not changed in three years. The pressing issue now is that the government has made it abundantly clear that it is hell-bent on leaving the EU on 31 October. Few in Westminster or elsewhere see the remotest chance that the Prime Minister will be able to secure a favourable alteration to the withdrawal bill between now and then.

Ahead of London's opening there were signs of a let-up in the downward pressure on sterling, but in the current mood that could be no more than a dead-cat bounce. The pound is behaving increasingly like an emerging market currency, a falling knife which no investor dare catch.

Not many numbers

It was not a red-letter day for economic data. Those that did appear during the London session gave no cause for concern and the Bank of England's Money and Credit figures for June were respectable, not that they did any good to the benighted pound.

Personal loans increased to £4.8 billion in June from £3.8 billion the previous month, and the number of mortgage approvals increased slightly to 66,440. In Spain, the two inflation measures came in at 0.5% for CPI and 0.7% for HICP. Spanish retail sales in June were up by 2.4% from the same month last year.  

The US contribution was the Dallas Fed's manufacturing index. It was six points higher on the month at -6.3 and the bank talked of "moderate expansion". Overnight, New Zealand reported a 3.9% monthly fall in building permits while in Australia they were down by 1.1% in June.  

BoJ steady

The Bank of Japan kept monetary policy unchanged this morning, as expected. There was no extension to its pledge to keep rates low "at least through spring 2020" but it did promise to ease "without hesitation" if inflation remains low.

European data this morning cover German consumer confidence, Swedish second quarter GDP, German inflation and a slew of EC confidence measures. After lunch there are US figures for personal income and spending, consumer confidence, house prices and pending home sales.

Tonight brings GfK's UK consumer confidence barometer, a couple of Chinese purchasing managers' indices, NZ business confidence and the Australian inflation data.

GBP: Sterling slumps as Brexit bites

GBP: Sterling slumps as Brexit bites

EUR: Inflation data from Spain and Germany

EUR: Inflation data from Spain and Germany

USD: Dallas Fed speaks of moderate expansion

USD: Dallas Fed speaks of moderate expansion

JPY: No change expected from BoJ

JPY: No change expected from BoJ

JPY: BoJ will ease if inflation stays low

JPY: BoJ will ease if inflation stays low

SEK: Q2 GDP today

SEK: Q2 GDP today

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