The wrong sort of excitement

Sterling buckles

For a second day on Monday investors paid significantly less attention to exchange rates than they did to equity prices. Depending upon which starting point is selected, and which stock exchange, shares were down by anywhere between two and eight per cent. Sterling did not fall that far.

The pound was indeed lower on the day though, by an average of 0.6%. It fell by more than 2% against the Japanese yen, which reaped the benefit of being a safe haven in a sea of red. Sterling lost one and a half US cents and half a euro cent. One of its problems was the UK services sector purchasing managers' index, which came in a point and a quarter lower on the month and missed forecast by a similar margin.

The other was the excruciating process of Brexit, which was dragged back into the spotlight by EU negotiator Michel Barnier's visit to Downing Street. His opposite number David Davis recited the litany of things that Britain wants and M. Barnier said yet again that it doesn't work like that. Investors were left to conclude that the two were no closer to an agreement.

Dollar develops

Although it was well behind the yen, the US dollar had another good day, strengthening by an average of 0.4% against the other dozen most actively-traded currencies and adding nearly one euro cent. European Central Bank President Mario Draghi said nothing to help his currency when he addressed the European Parliament.

Of the two US services sector PMIs, the one produced by Markit was on target and unchanged on the month. The other, from the Institute for Supply Management, was up by four points at 59.9 and that is the one to which investors pay more attention. 

Sig. Draghi refrained from making any noises to support the euro. He seemed no closer to ending the ECB's money-printing asset purchase programme, saying that while inflation was heading towards its 2% target "we cannot yet declare victory on this front". He did sterling no favours either, when he said the bank was making preparations for a disorderly Brexit.

No change at the RBA

The Reserve Bank of Australia announced this morning that it was keeping its Cash Rate benchmark unchanged at 1.5%. The Aussie dollar softened slightly on the news and it is just about unchanged on the day. There is not much of interest on the rest of the day's agenda.

A couple of hours head of the RBA news the Aussie was pushed onto the back foot by a 0.5% monthly fall in Australian retail sales and a widening of the trade deficit as imports went up by 6% and exports by just 2%.

There are data today for German factory orders, Swedish industrial production, South African business confidence s well as balance of trade figures from Canada and the States. More PMI readings, this time from Canada and Australia, appear this afternoon and tonight.