Janet and George

Polls axe pound

With his pre-referendum budget the chancellor continues the tradition of leaking some of the more headline-grabbing measures ahead of his speech. Today's nugget is a one-hour extension to the five-hour school day which will improve productivity by 20%. It's all about distraction, as yesterday's opinion polls demonstrated with sterling.

A couple of UK opinion polls received particular attention yesterday. The more amusing one, conducted online by a local freesheet, found 80% of Wulfrunians in favour of leaving the European Union and 16% wanting to stay. The other, sponsored by a national paper, gave the leavers a narrow edge of 49% to 47% with 4% undecided. With nothing else to feed their constant hunger for tradable statistics, investors seized upon the results with gusto. (For the sake of balance it must be pointed that the bookies still have the odds against Brexit at 2/1.) 

Investors' reaction was another reminder that they still view the possibility of Brexit as a negative for sterling. The pound was Tuesday's worst-performing major currency, falling by one euro cent, one and a half US cents and one and a half Japanese yen. It lost an average of -0.5% to the other dozen most actively-traded currencies.


Britain's pound failed to pick up the wooden spoon though. The South African rand's performance made sterling look good. It fell by -2.4% against the US dollar on news of heightened tension between the finance minister and the police and fears that the country's credit rating could be downgraded.

The Directorate for Priority Crime Investigation - known as the Hawks - accuses Pravin Gordhan of failing to cooperate with its investigation into illicit goings-on at the South African Revenue Service while he was commissioner there. For his part, Mr Gordhan says he is being harried unfairly by the Hawks. Meanwhile, analysts from Moody's are on their way to Pretoria to reassess South Africa's Baa2 credit rating and they are suspected of having a downgrade in mind.

Tuesday's two other underperformers were the Norwegian krone and the NZ dollar. They managed to stay ahead of sterling but not by much of a margin. The krone's problem was oil, the Kiwi's milk: the prices of both commodities fell.

A big day ahead

Sterling and the US dollar will share the headlines today. The pound will be challenged first by the UK employment data at half past nine and then by the chancellor's budget speech shortly after midday. This evening the Federal Reserve chairperson hosts a press conference. 

Although UK budgets do not usually upset sterling, the Office for Budget Responsibility's economic projections can. A downgrade to growth is on the cards today but sterling would be likely to suffer if it were more than expected.

No change to US interest rates is anticipated at six this evening. However, Janet Yellen will be facing journalists half an hour later and they will push her, inevitably, for guidance on where rates are going, and when.