Daily Brief

Daily Brief

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Tuesday

Trade in the spotlight

Once again it was a fairly neutral day for sterling. It was on average a touch lower - but only a touch - against the other majors. In last place the Swedish krona hit a ten-year low against the euro while the Canadian dollar led the field. The two were separated by 0.9% on the day.

There were no Swedish or Canadian economic statistics to drive the separation. The Loonie's three-quarter-cent gain appeared linked to a continued rebound in oil prices from Thursday's lows. The krona's decline was said to result from trade concerns.

Those concerns were eased, to an extent by the signing of a US trade agreement with Japan. On the other side of that coin, as trade talks began with China, Washington blacklisted another swath of Chinese tech firms for human rights violations. This could prove to be a further obstacle in the way of a positive resolution.  

Modest expectations

A "secret" paper issued by the Ministry of Housing, Communities and Local Government reveals that 50% of the population expects Britain to leave the EU on 31 October. Judging by the shape of sterling and the bookies' odds that number looks quite high.

Bookmakers are quoting odds of 3/1 against for a 31 October departure and 1/4 on for a later date. Punters also see only a one in four chance of a no-deal Brexit. Moreover, sterling is behaving as though investors are banking on an extension to Article 50, whatever the prime minister might say. Options to buy the pound now cost more than options to sell it. That is not to say sterling is going up: it is an average of 0.2% lower than a week ago.

The only data that might have affected it on Monday were house price and retail sales. The Halifax building society said house prices fell 0.4% in September, leaving them 1.1% higher on the year. The British Retail Consortium said retail sales in September were 1.7% below the same month last year and 1.9% down from September 2017. The decline was attributed to "the spectre of no-deal weighing increasingly on consumer purchasing decisions".

The governor

Today's agenda is longer than Monday's but of no higher quality. Two of the three biggest items have already been and gone, with a speech by the Bank of England governor and the Germany industrial production data. 

Mark Carney spoke to the Task Force on Climate-related Financial Disclosures about "strengthening the foundations of sustainable finance". He had nothing to say about monetary policy or the pound. German industrial output unexpectedly increased by 0.3% in August and was down by 4.0% on the year.

Other data today covered Swedish industrial production, Italian retail sales, Canadian housing starts and building permits, US producer prices and, tonight, Australian consumer confidence. There are no UK ecostats.

GBP: Half of Brits expect no Brexit this month

GBP: Half of Brits expect no Brexit this month

SEK: Ten-year low against the euro

SEK: Ten-year low against the euro

CAD: Helped by oil rebound

CAD: Helped by oil rebound

USD: Mixed messages on trade

USD: Mixed messages on trade

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