How quickly they tire

Brexit fatigue

European Council president Donald Tusk observed yesterday that the free trade agreement offered to Britain by the EU "cannot offer the same benefits as membership" and "will make [trade] more complicated and costly than today for all of us. This is the essence of Brexit." Investors yawned and sterling edged higher.

There is a sense that investors are all Brexited-out, at least for the time being. In the last couple of weeks the main protagonists have all had their say. It is evident that they remain in disagreement and there is nothing more that investors can do about it until something new comes up. With no UK economic to guide them, they allowed the pound to tick higher against all but the Canadian and NZ dollars, to both of which sterling lost a third of a cent.

The pound's biggest gain was the cent it took off the Swiss franc, 0.8%. The move coincided with an assessment by ANZ bank that the franc is the most overvalued of the major currencies, with the Kiwi and Aussie not too far behind. It was probably not the ANZ paper that took the franc lower - everybody has known for ages that the franc is too strong - but the coincidence was instructive.

Trade war update

Investors seized upon comments from the White House suggesting that Canada and Mexico might not be hit by protectionist tariffs. Rightly or wrongly they inferred that the president could be about to cave in to free-market advocates in his own party. The Greenback was just about unchanged on the day.

Investors have become bored with the trade war bluster even more quickly than they have with Brexit. They fancy that the president is playing to his fan-base and that the tariffs will not easily find their way into the tax code. A $56.6bn monthly US trade deficit, the biggest in nine years, was not enough to shake that belief.

North of the border, the Bank of Canada left its benchmark interest rate unchanged at 1.25%, surprising nobody. The Loonie weakened on the BoC's less-than-ebullient statement but within a few hours it had made a complete recovery. It shared top slot with the Aussie, which was helped by a wider-than-expected trade surplus.

ECB and NFPs

The biggest potential for anti-climax today lies with the European Central Bank, which is expected to keep monetary policy unchanged. Friday's UK production data are theoretically important to the pound, as is the monthly change in US nonfarm payrolls to the dollar.

On all those fronts investors would probably need to see something quite dramatic if they were to change their expectations in a significant way. The ECB will probably leave the door open to winding down its asset purchase programme but is unlikely to make any commitment. 

The US jobs numbers ought not to change expectations for three, possibly four, rate increases this year. Nevertheless, a weak figure could conceivably dent the dollar.