The long and slippery slope

Pigs and bears
If one of the kids wants Peppa Pig for her birthday be careful about promising anything. It will cost at least £1bn, for that is the bid already rejected for Peppa and the rest of her drove. Mind, before the EU referendum that would have been $1.5bn: today it is only $1.3bn.

Since Brexit Eve the pound has fallen by an average of -13.1% against the other dozen most actively-traded currencies and as yet shows no sign of bucking the downward trend. Sterling was not quite the weakest performer on Friday but it only beat the Australian dollar and the South African rand by a nose. 

Data from the US Commodity Futures Trading Commission showed sterling net short positions rising to a record 90,082 contracts last week, equivalent to a nominal £5.6bn that investors have sold on futures exchanges in anticipation of a further decline for Cable. If that bearishness is matched in the much bigger cash market the world is indeed exceedingly negative about sterling. In theory that sets up the prospect of a short-covering rally but it is difficult to imagine such a rebound being sustainable.

Dollar wobbles
There was an example of a short-term bounce on Friday when the American retail sales figures came out. Sales were flat in July and down by -0.3% when motor cars were removed from the equation. Sterling popped nearly a cent higher but did not take long to fall back to earth.

The retail sales data came as a bit of a shock initially but investors were less bothered by them after they had taken into account upward revisions to earlier months. On the day the US dollar lost no more than a couple of dozen ticks to the euro and it was up by half a cent against the pound.

The commodity currencies were alongside sterling at the back of the field while the Japanese yen led the way, strengthening by 1.1%. There was a risk-off flavour to the whole thing, though weekendular position squaring probably also played a significant role. 

Assumption Day
The religious holiday in large chunks of southern Europe means a dearth of €Z data and there are only very few from North America either. Britain's sole contribution is the Rightmove index, which came out at midnight and showed asking prices for UK residential property falling by -1.2% this month.

Also appearing overnight was Japan's gross domestic product for the second quarter. Growth was a disappointing 0.0%, where a 0.2% expansion had been forecast. The news did no harm to the yen, which is flirting with psychological resistance at ¥100 per US$1. Data from the States today cover the housing market, manufacturing activity in New York and long-term international investment flows.

It will be the calm before the potential storm for sterling, which will must cope with the first hard post-Brexit-vote economic data this week. Tomorrow it's inflation, Wednesday is jobs and Thursday brings retail sales.