The investors' punchbag

Sterling whacked again
Well, it's all kicked off in the referendum hearts-and-minds campaign. The Stays warn that an independent Britain would become a cockroach-infested hotbed of unemployed plumbers: the Leaves warn of upcoming EU bans on black pudding and drawing pins. And there is similar scaremongering about the outlook for the sterling/euro exchange rate.

The conventional wisdom is that sterling would weaken against the euro were Britain to leave the EU, not as a result of the UK economy suffering but because of the uncertainty of the country's new and untested situation. There is another argument which has it that sterling's departure would drag down the euro with uncertainty of its own about the permanence of the €Z.

Yesterday it was conventional wisdom that had the upper hand and sterling came bottom of the class for a second day with an average -1.2% decline against the other dozen most actively-traded currencies. However, the euro did not do a whole lot better: it took the penultimate spot with a gain of just half a cent against the pound.

Risk thrives
Monday was another good day for risk assets, including commodities and energy. The commodity dollars and the South African rand made the most ground, the rand leading the way with a gain of 2.1%. Economic statistics did not add much to the debate.

Except for French manufacturing and German services the provisional purchasing managers' index readings from Europe and the United States fell short of expectations. The Euroland manufacturing measure was the lowest for a year and its US equivalent was the weakest since November 2012. 

The sole UK statistic was the CBI's Industrial Trends Survey, which has been negative for ten successive months. The reading for February was -17, four points below forecast. The figure was arguably bad for the pound but at the time it came out sterling was already being pummelled and investors had no need of another stick with which to beat it.

Carney alert
The Bank of England governor will be visiting parliament's Treasury Committee this morning to talk about inflation. There is just the merest chance that he will be asked about the implications of the referendum and its two possible outcomes. The Bank's chief economist has a speaking engagement this evening.

It will be another quiet day for ecostats. Germany has already confirmed that its economy expanded by 0.3% in the fourth quarter of 2015 and the business confidence figures come out later this morning. After lunch there are US data for house prices, existing home sales and consumer confidence as well as the Richmond Fed's manufacturing index.

Mark Carney's appearance in Westminster will be of acute interest to investors. The assumption is that he will either toe the government line or recuse himself from discussing the subject. It is hard to imagine him saying anything that would make sterling's position any more precarious but he might come out with a little salt to rub into its wounds.