Murphy's Law

"Anything that can go wrong will go wrong" must by now be the motto of the government's Brexit team. On Wednesday the sky was black with chickens coming home to roost when last year's vague promises about a borderless island of Ireland appeared in concrete form as part of the EC's draft withdrawal agreement*.

The main bone of contention (there were plenty of others) was the bit that says "The territory of Northern Ireland… shall be considered to be part of the customs territory of the [European] Union." A charitable view would be that by remaining in the single market, Northern Ireland would retain the free movement set-up demanded by both sides. The prime minister's critical interpretation was that "no prime minister could ever agree" to a measure that would "undermine the UK common market and threaten the constitutional integrity of the United Kingdom".

Back to the drawing board then.  Mrs May has the opportunity to offer a counter-proposal on Friday when she is scheduled to make a speech about Brexit. Yesterday, though, investors could see all sorts of bother and no obvious upside. Sterling was lower across the board by an average of 0.6%. It lost one euro cent and two and a half US cents.


At least in London, non-Brexit-related issues were relegated to the any-other-business category. For a second successive day the safe-haven Japanese yen led the field, closely followed by the rising-yield US dollar. Economic data from Euroland and North America were mostly uncontroversial.

Gross domestic product data showed Sweden's economy expanding by 0.9% in the fourth quarter while growth in France, Portugal, Switzerland and the States came in at 0.6%, 0.7%, 0.6% and 0.6% respectively. Personal consumption expenditure, the Federal Reserve's favoured measure of US inflation, was a tick lower than expected at 2.7%. America's residential property market delivered another duff result with pending home sales down by a monthly 4.7%.

Overnight data put Australia's manufacturing sector purchasing managers' index a point lower at 57.5. China's small-cap Caixin manufacturing PMI ticked up to 51.6.

PMIs, speeches and votes

There are some seriously big-ticket items on the agenda for today and Friday. The headline acts will be the Fed chairman, the British prime minister and the Bank of England governor. Top events include a general election in Italy this weekend and the possible formation of a German coalition government. A raft of PMIs come out today.

It being the first of the month, investors will be subject to a barrage of purchasing managers' index readings, mostly relating to the manufacturing sector. There will be figures from Sweden, Spain, Switzerland, Italy, France, Germany, Greece, Britain, Canada and the States.

This afternoon Fed chairman Jerome Powell will make his second appearance in Congress, either to reinforce Tuesday's hawkishness or to tone it down. Theresa May will meet with EC president Donald Tusk today to discuss options for Northern Ireland, which she will then (presumably) share with her cabinet before tomorrow's speech.