Daily Brief

Daily Brief

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Another kicking for sterling

Just another day at the Brexit office

Over the last month sterling has kept pace with the Norwegian krone. That is the good news. Sadly, over the last month, week and day it has lost ground to every other one of the ten most actively-traded currencies. It took a 0.6% bath, on average, yesterday. Brexit means Brexit.

The purchasing managers' index for UK manufacturing was stronger than expected, coming in at a two-month high of 53.1, above forecast and two points higher on the month. Unfortunately the higher number concealed a second monthly decline in export orders and confidence dipped to a 27-month low. From sterling there was no positive reaction whatsoever. The first instinct of investors when London opened was to mark the pound down. Their mood did not change throughout the day, though they approached their task with less gusto after lunch. Sterling lost half a cent each to the US dollar, the euro and the Swiss franc. Its biggest losses - 1% and more - were to the NZ dollar and South African rand.

The two most notable stumbling blocks for the pound were Parliament's revolt at the government's non-disclosure of legal advice on the Brexit deal and a bumbling performance by Brexit minister Stephen Barclay, who confessed to the Exiting the European Union Committee that he had no plan to handle a no-deal split with Europe.

Dollar backs off

After looking sprightly during the early London session the US dollar spent the rest of the day in retreat (except against sterling, where it was flat). Investors are increasingly concerned that the upward trajectory of US interest rates is about to flatten out, and America's ISM purchasing managers' index data fed that concern. 

The headline manufacturing PMI from the Institute for Supply Management looked great: at 59.3 it was higher on the month and nearly two points above forecast. However, the "prices paid" component was 11 points lower on the month at 60.7. Raw material prices went up for a 33rd consecutive month but they went up much more slowly, suggesting an easing of upward pressure on inflation.

Investors do not expect the Fed to shrink from delivering another rate hike when the committee meets in two weeks' time. However, they do fancy that the "dot plot" of members' expectations will no longer assume such active tightening in the future.

RBA holds

The Reserve Bank of Australia surprised no one when it kept its Cash Rate unchanged at 1.5% this morning. The statement gave no hint that the RBA is in any hurry to take rates higher. The only other big event today will be the Bank of England governor's attendance at Parliament's Treasury Committee.

At 09:15 Mark Carney and his lieutenants will be answering questions on the bank's Brexit analysis. Anything could happen.

Breaking news: As London opened the European Court of Justice said Britain could unilaterally revoke its Article 50 decision to leave the EU. The pound jumped higher in the hope that it might just do that.

GBP higher at London open after ECJ delivers Article 50 verdict

GBP higher at London open after ECJ delivers Article 50 verdict

USD struggles as rate hopes fade

USD struggles as rate hopes fade

ZAR higher in delayed reaction to trade war truce

ZAR higher in delayed reaction to trade war truce

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