Brexit waters muddied
Sterling strengthened on Tuesday in anticipation that the House of Commons would begin to make progress on legislation to prevent a no-deal Brexit. It was only briefly held back by weak UK economic data and the possibility of an early general election has not yet done any damage.
The Rebel Alliance, until yesterday thought to be the protagonists of a Star Wars movie, beat the government 328-301 in a vote to allow the House to take control of its agenda. The Commons will use that control today to introduce Hilary Benn's European Union (Withdrawal) (No.6) Bill. On current form it ought to go through. 21 Conservative MPs voted against the prime minister yesterday to get it this far, despite the threat of expulsion from the party: it is unlikely that they will blanch at the next stage.
It is not a done deal though. Even if it passes into law it could be reversed by a subsequent majority Johnson government. And the prime minister wheeled out that possibility last night when he threatened to call a general election. To get there, though, he needs the support of two thirds of the House. The leader of the opposition has said he will not give that support until the anti-no-deal bill has completed its passage through Parliament.
US manufacturing wobbles
There were purchasing managers' index readings from Britain, North America, Australia, Japan and China. The Japanese services sector seemed to be in best shape while US manufacturers revealed an unexpected downturn.
The two manufacturing sector PMIs for the States came in at 50.3 (Markit) and 49.1(ISM). Although the Markit reading was better than expected, the ISM measure was not, and that is the one with the longer history that is more closely watched by investors. It cost the dollar an immediate quarter of a cent against the euro and it became the day's laggard, falling an average of 0.4%.
Australia's dollar made steady headway through Tuesday following the RBA rate decision. It received a modest overnight boost from news that the economy expanded by 0.5% in the second quarter. By Australian standards that constitutes sluggish growth but at least it is still comfortably positive. The Aussie was the day's top performer, adding three quarters of a cent against sterling.
Lagarde breaks cover
There is something for everyone on today's agenda. Europe will release its slew of services sector PMIs. Euroland reports on retail sales. Canada and the States publish their latest trade figures. The Bank of Canada announces its rate decision. A bunch of Fed chiefs will be speaking and the European Parliament will interview Christine Lagarde, the putative incoming ECB president.
All the European services PMIs are expected to be in the growth zone above 50. Germany is pencilled in at 51.4 and Britain at 51.0. Euro zone retail sales are supposed to have fallen 0.6% in July. Canada's central bank is expected to leave its target for the overnight rate unchanged at 1.75%.
With Parliament preparing to debate the anti-no-deal Brexit bill, and with that bill looking likely to succeed, logic would suggest an upward tilt to sterling. But this is Brexit, there could be movement in either direction.